The Basics of Binary Options Trading Explained
Binary options trading is the fast way of making big money. A trader can cash upon the fluctuations in the price of stocks or other investment options through this kind of trading. You need not be correct about the quantum of change; just speculating about the future trend can get you a lot of currency in your pocket. This type of trading is baseless without research and market study. You are simply throwing darts in the dark if your speculation is not based on the study of market trends and accordingly, it can put you in big soup in the long run. How Binary Options Work? If the trader wants to speculate about rise in the price, he will buy a ‘call’ contract and will go for ‘put’ if fall is the expected trend. There is a price known as strike price that actually forms base of the contract. Strike price most of the times is actually the price of the stock, index or commodity. If the trend speculated falls on the correct side of the strike price, the trader gets the benefit. Every binary options contract has an expiry period. This may be as small as few hours and as long as few months. You may get into multiple contracts at a time during a business day. Types of Binary Options
•
•
•
High-low option – This is the most popularly traded binary option. It is traded in interglobal markets and allows a trader to enter all sorts of markets such as stock, commodities, currency exchange, etc. Trader when opts for ‘call’ option, makes money if the entity price also rises as expected; however, the reverse brings him loss. Trader enjoys the full transparency in this kind of trading as every information piece such as strike price, payout, trend of the market etc is displayed on screen in front of him on real time basis. Range option – U.S. market allows only high-low option for binary options traders. Markets outside the U.S. allows other kinds of binary options too, most popular being range option. In this type, the stock or similar entity needs to trade within a price range selected before the expiry of the contract. Target price option – As the name indicates, the price of entity needs to touch a target figure once during the contract period before a trader can book profit.
Binary options trading gives fixed payout to trader. Payout can range from 5% to 500% depending upon the option chosen. Traders are given various new ways of investing money so that the binary option arrangement can be explored and exploited to the fullest. Strategies Helpful in Making Big Money through Binary Options Trading You need to proceed strategically to ensure big profit through binary options trading. Day trading: Day trading platform suits the binary options perfectly. The market tends to follow wave pattern during various time periods during the day, making conditions favorable for speculating a rise and fall. Several principles like Elliott wave etc can provide the required boost to your speculation about what to expect next. Daily pivots: Based on price chart analysis, trader buys when the price reaches lowest of the day and sells when it reaches highest. Call options are exercised when the price starts showing upward trend. Momentum trading: This strategy works when certain news shows its impact on the market. Copying the investors, a trader may also go for buying the stock and enter into ‘call’ contracts simultaneously in order to take full advantage of momentum that has set the mood of the market. Correction points are ideal for ‘put’ option. Independent Investor