Binary Option Trading
Frequently Asked Questions
What Are Binary Options?
A binary option is a day trading investment instrument. It’s a newer form of trading that’s steadily growing in popularity, especially with forex traders. The binary market works with the forex market, but limits trades to “in the money” or “out of the money.” Investments are made by deciding whether the market will rise or fall in a specific time. If the market moves in the direction that you predicted, you get an instant payout of up to 81%.
Why Trade Binary Options?
This type of trading doesn’t require any knowledge of the forex market, pips, trends, or patterns. Traders profit from very slight movements in the market, which makes it easier to trade profitably. Trading is done online or on your mobile device, making it a very convenient way to trade.
How To Trade Binary Options
Trading is done in four simple steps:
1. Choose an asset to trade. Your investment may be a stock, index, forex pair, or commodity.
2. Select a time frame. This can range from sixty seconds to a few months
3. Decide on the direction of the price. If the market is bullish, a Binary Trader may choose the call option (up). If the market is bearish, they may choose a put option (down).
4. Choose your investment amount and click the start button. Then you simply wait for the predetermined amount of time to find out if you’re “in the money” or “out of the money.”
What is a Call Option?
A call option is a buy. If you estimate that the forex market, commodities market, or stock market will rise in a predetermined time, you would click the “buy” button.
What is a Put Option?
A put option is a sell. If you feel the markets will drop in a predetermined time, you click the “put” button.
What is the Advantage of Trading Binary Options?
Binary options give you a high potential return on investment in a very short time frame. For example, if you place a “call” (buy) option on the EUR/USD pair and it increases .00001% in the timeframe you chose, you are paid up to 81%.
Is It Riskier To Trade in the Binary Options Market, or the Forex Market?
Both markets come with an inherent risk of losing your money. They also come with the potential to double, triple, and quadruple your money very quickly. The Binary market gives you the ability to better control your investment risk. The most you can lose in a Binary Options trade is the investment you choose. Your investment can be as little as $5, or as high as the Binary platform you’re trading with allows. Your Return On Investment (ROI) is predetermined, so you know how much you’ll make right from the beginning. For example, if you buy a $100 investment with an 81% return, you know that a winning trade will net you $181. If you lose the trade, you’ve lost $100.
In the Forex Market, each trade has the potential of losing all the money in your account, if you don’t trade using proper risk management. There is no predetermined payout, but if the market is volatile and you make the right choices, you can profit immensely in this market as well.
Both markets have their advantages and disadvantages. When traders refine their systems and settle on systems or indicators that work for them, it becomes very profitable to trade in both markets.
What Should I Look for in a Binary Options Broker?
Since Binary Options Brokers differ from platform to platform, signing up with one that suits your trading style will help you become more profitable. Some features to look for are:
You can decide on user friendliness by looking at the platform. If it’s easy to navigate and the interface is clean and easy to use, you’ll probably feel comfortable using the system.
Customer service – It’s easy to test the customer service. Simply send an email to their support email address and monitor how long it takes for them to reply and how well they answered your question. A quick, quality reply at this point, before you sign up for an account, is a good sign.
Check the assets you can trade. You want a wide range that gives you plenty of options from foreign exchange currencies, to commodities like oil and precious metals to trading markets like the NASDAQ and companies like Google.
Check the platform for different trading options like 60 second options, Option Builders, and both long and short term trading ability.
Forums and reviews
Check out what other people are saying about binary brokers in the forums and online reviews. Although one or two positive or negative reviews won’t give you definitive proof, if eight out of ten reviews are positive, you can be pretty sure you’ve decided on a reputable broker.
Recommended Trading Platforms
TradeRush offers Binary options trading in currency pairs, indices, stocks, and commodities. From time to time, they offer bonuses on your deposit and often run promotions.
They offer several trading categories including 60 second options, One Touch, Option Builder and Option Pro, in addition to long and short trading options.
TradeRush doesn’t charge commissions and offers payouts between 70% and 81%.
Redwood Binary Options is a newer platform, but comes with the trading categories you would expect. The 60 second options, One Touch, long and short trades, and a personal favourite, the Option Builder.
The Option Builder allows you to build a trade with your specifics. You can set the financial asset, the type of contract, your risk vs profit ratio and how much you wish to invest. It’s flexible and easy to use.