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The stock market today offers its traders quite several trading options. These options surpass the buying and selling transactions of individual stocks.
One of the popular trading methods most traders use is the speculation of binary options. This kind of trading offers thrilling investment profit outcomes from bullish and bearish market trends.
This article will provide a simple guide to understanding trading binary options. Additionally, you can browse around this site to know more.
What Is a Binary Option and How Can You Profit from It?
A binary option is otherwise known as an asset derivative. An asset is an item of value that can be bought or sold on the stock market. Assets can include company stocks, crypto, currencies, indices, precious metals, etc.
When a binary option is bought, it is used to stake or, rather, based on the movement of any assets listed. For example, if you base your binary option on the value of an asset on a company like Google.
This isn’t the same as buying Google stocks and hoping for the asset to grow for you to sell it and make a profit. Instead, you speculate that at a specific date or time, the market value of Google will fall (put option) or rise (call option).
Simply put, binary options trading is a fast, less risky process that allows investors to speculate on whether an asset’s price will rise or fall at a given time or date.
Binary options trading has become more popular mainly as a less risky trading option with a specific fixed risk and reward system.
The unique feature of other trading options and binary trading is the fact that you can earn profits from assets losing their value. Your profit is not tied to the asset’s exact value, but rather it’s in movement.
Types of Binary Options
“Up/Down” trade is the most popular binary trading option. The common factor is that its result is binary (Yes or No).
Some types of binary options trading are:
- In/Out, Range or Boundary
This option involves setting a high and low figure, with the trader predicting if the exact price will finish within or outside the set boundaries or levels.
- Touch/No Touch
This option involves setting a level higher or lower than the asset’s current price. The trader will then predict that the asset price will touch either of the set levels to get their profit.
This option is similar to the up/down trade but presents a ladder with preset price levels that go higher and lower than the asset’s exact price.
- Up/Down or High/Low
This is the most common and basic binary trading option. It is based on whether the price of an asset will finish higher or lower than its current price.
How to Trade Binary Options
- Choose a reliable Broker
Choosing an online broker is the first step to trading. It is a critical step as choosing a wrong or inexperienced binary options broker will cost you a lot. Go for a broker with safe and reliable trading options to yield maximum results.
- Choose an Asset or Market to trade
Another vital step is picking an asset from the asset lists, which you can use to base your binary options trades. You should also ensure that your assets of interest are aligned with your broker to properly manage your capital gains and losses, and avoid a conflict of interest.
- Conduct analysis
Before doing anything, you must research more about the asset and the market. Calculate how much you are willing to invest and create a solid strategy. Simply rushing into the market without prior research or analysis can lead to bankruptcy.
- Pick a Pull or Call Option
Choosing the right pull or call option depends on you and your broker’s strategy. Watch the market closely and take notes of key movements. This will enable you to make the right choices.
- Select an Expiry Date
An expiry date is simply the point at which a trade is to be settled or closed. The expiry dates can last from 30 seconds to months and even a year.
- Confirm the trade and repeat
The final step is to confirm the trade your broker has placed for you. This is to ensure that all the details are correct before the trade is placed.
Due to the ban on the sale and marketing of binary options to private investigators in the EU by the European Securities and Markets Authority (ESMA), those affected by the ban can trade with a broker licensed by a foreign regulator.
Binary options trading is highly recommended for anyone. It gives you an exciting chance to place a potential trade with a huge profit. Its profit margins can range from 75% to 90% and can kickstart your trading career.
You should first try practicing with a demo account before using real money.
Disclaimer: This article is not intended to be a recommendation. The author is not responsible for any resulting actions of the company during your trading/investing experience.
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