A decade ago, trading online the way it is done now was practically inconceivable. Thanks to numerous trading opportunities such as binary options, one can nowadays trade easily online.
You don’t even need a big team or large sums of money to make huge profits. You only need to know what binary options are, learn how to make smart trades by practicing at sites like https://www.binaryoptions.com/broker/quotex/quotex-demo-account/, and consider some factors that will boost your chances of making a lot of money.
This article will reveal everything you need to know about binary options.
Things you need to know about binary options
Binary options: what are they?
Binary options are financial instruments that turn each trade into a straightforward ‘yes’ or ‘no’ question. They are fast-paced and unique trading opportunities for people to make money with limited risks. You decide if a specific market will likely be above a particular price at a specific period/time.
If you think or believe that the market will be at that price at that time, you buy. If you believe or think otherwise, you sell.
When a trader orders a binary option contract, the trader speculates on the market instead of buying a specific market share. That price is always set between $0 and $100.
Binary options contracts generally offer highly defined, clear, and sometimes risky outcomes. The contracts are considered ‘binary’ since there can only be two possible outcomes at expiration. You will either lose that money you paid to open the trade or make predefined profits.
This makes it incredibly easier to make decisions on trading since you already know the exact amount of money you may lose if something happens to go wrong.
If the market doesn’t move against you, you will also know the precise amount of potential profits you will make. This makes binary options a fascinating but controlled way of trading.
- How binary options work
Here are the three vital elements that make up a binary option contract:
Underlying market
This refers to the specific market you decide to trade. This could be forex, commodities, stock indices, and events.
Strike price
This is the most crucial price level. The strike price is key to the binary option deciding process. To place a specific trade, you need to decide if you think or believe the underlying market, highlighted previously, will be below or above the strike.
Expiration time and date
Traders can trade binary options contracts that last up to one week. Trading duration can even be as short as five minutes.
When speculating with binary options contracts, four markets are in play:
- Stock indices
- Forex
- Commodities
- Events
Binary options contracts are available night and day. Binary options trading offers an opportunity for people from all walks of life and different levels of experience to explore and make money.
Making smart or shrewd binary options trades
Binary options have a low entry level which attracts tons of casual investors. You can create a binary options account on a chosen platform, invest just $10, and start trading within 10 minutes.
However, many of the casual investors that troop to trade on binary options platforms lose a lot of their money very quickly. This is mostly because they lack in-depth knowledge of the currency changes in the price of commodities and stocks.
To make long-term profits via binary options, you should consider some factors before making every trade.
Many binary options platforms offer comparatively high potential returns, up to and above 60 percent. This is because most investors lose a lot of their money. A regulated platform is essential to know the exact percentage of losing investors.
You can usually find this vital information on the trading platform’s homepage. In some instances, some of the money that some traders lose is used to pay investors that win.
Factors you must keep in mind to win trades
Here are some factors every trader should keep in mind:
Get the right/ideal information
A renowned theoretical physicist once said that if you stop learning, you start dying. This is true when it comes to the world’s dynamic economy. Don’t stop learning; even Warren Buffet and other global top investors always learn.
A particular event in one country can significantly impact the price of a specific commodity in another country. Therefore, find and utilize several online tools that will keep you updated on the goings-on around the world.
Trade binary options on the right trading platform
Many binary options trading platforms are not properly regulated. Using such a platform leaves you unprotected if a dispute ensues. Don’t be part of the statistics of horror stories of traders losing large sums of their hard-earned money through none of their single faults.
Moreover, some trading platforms are far easier to navigate than others. This makes them perfect for newbie traders or those trying to trade for the first time.
Suppose you want to trade binary options and make good money most of the time. In that case, you need to develop a quick, high-level thinking ability. You need this ability if you don’t want to miss out on profitable trades.
Use platforms with demo account functionalities. This helps you develop and hone your trading strategy.
- Manage your investment/money strategy
Binary options, just like forex, will make you lots of money quickly or within a short period. But you can also lose lots of your hard-earned money just as fast.
You can avoid such scenarios by making only data-backed trades, including managing all your money prudently. You should only take trades with money you can afford and are willing to lose.
If you ignore this simple advice, you will get into the rat race of chasing your losses. This is even more dangerous as you will no longer make calculated decisions. Your trading patterns will be akin to that of an unrepentant gambling addict.
Conclusion
Binary options contracts offer people fast-paced and unique trading opportunities to make money with limited risks. These contracts are perfect for traders with different experience levels, newbies, or veterans.
To make good money and manage your risk efficiently, ensure you stick to your trading plan. This will protect you from risking too much of your capital and losing much more than you can ordinarily afford.
Photo by Avinash Kumar on Unsplash
