In the past few years, binary options trading has become one of the most exciting, lucrative ways to make money in the financial markets. Binary options are simple to understand and geared towards regular people, don’t require a large initial investment, and have the potential to pay out huge returns. However, just like any other method of trading there are risks involved, and you need to have an understanding of what binary options are and how they work before taking the plunge and starting to trade. Therefore, it is vitally important to read up on binary options for beginners before committing any real money.
Binary options, created in 2008, are different kinds of options, and something that had not been seen previously in the financial markets. Instead of having a variable amount of outcomes from a single trade, binary options have only two possible results: win or lose. When the trade is complete, you either make a pre-set profit, or lose everything you put into the trade. While this may seem like a negative in that you cannot recoup some of your investment, it is actually a positive because it lets traders always have a precise idea of how much they can make, or lose, on each trade and allows them to keep a good eye on their money. In this manner, binary options trading for beginners is made much easier to undertand.
Because of this simplicity and exactitude, explaining binary options trading for beginners takes far less time than with any other type of trade, making binary options far more accessible to the average person. If you already have a lot of experience with day trading, traditional options trading, Forex markets, or commodities, than you can use your existing knowledge to quickly and easily devise a binary options strategy. But for those of you who may be new to the whole concept of financial markets and online trading, you will need to learn how binary options work and spend some time trading in a demo account before you put your own money on the line.
Before going over options trading strategies for beginners, it is vital to understand exactly what binary options are. Unlike buying a stock, where you actually buy a piece of the company itself, binary options are contracts between traders and brokers that seek to predict the movement of an underlying asset. Another way to think about it is that binary options are a type of ‘wager’ that a stock, commodity, or currency will move up or down in a certain period of time. If the trader predicts the movement successfully, he or she wins the trade and makes a profit, and if he or she is wrong, their initial investment is lost.
Let’s take a look at an example of how this works. A binary options trader might think that a certain company’s stock price, let’s say Apple, is going to increase in the next hour. So this broker offers a binary option stating that the price of Apple will increase, with an expiry time of one hour. A trader then, buys that option for a certain amount of money. If, at the end of the hour, when the option expires, the price of Apple has indeed increased, then the trader gets his initial investment back, as well as a large, pre-set profit percentage. If the stock has not increased, then the initial investment is lost completely. As far as binary options trading for beginners information goes, this is the most important thing to understand.
One of the most important factors in binary trading for beginners is choosing a good broker to start trading with. Nearly all brokers allow you to set up a demo account with them so that you can start binary trading without risking any real money. This allows you to see exactly how the site works, and what kinds of pay outs and loss refunds you are able to get with that broker. Most binary options traders have accounts at multiple brokers, due to the fact that different brokers offer different returns on different types of trades. One broker might offer the best return on binary options, while another might offer the best return on Forex options, so it is important that you know each brokers strengths and weaknesses.
A couple of additional factors in choosing a broker include whether or not the broker offers cash bonuses for binary options trading for beginners as well as returns on losing trades. Some brokers will offer a percentage return on a lost trade, sometimes up to 15%, which can certainly help you absorb a bit of a loss during a trading slump. Many brokers also offer cash bonuses upon sign-up as a percentage of your initial account deposit. A broker might offer a 25%, for instance, which means that if you deposit $1,000 when you create your account, you will receive an additional $250 once you have completed a certain amount of trades. Of course loss-returns and sign-up bonuses are certainly not the only reasons to choose a broker, they are certainly something to keep in mind when shopping around.
Once you have created accounts with a few different brokers, done some demo trading, and made your first deposit, and read up on binary options for beginners, it is time to slowly ease your way into binary options trading. With binary options trading for beginners, it is absolutely vital to start slow, perhaps only making a couple of well thought-out trades per week while you are learning the ropes of trading. It can be extremely tempting to just jump in and make a dozen trades a day, but doing so too fast is a sure recipe for taking a loss on your trades.
In addition to staring out slowly with your trading, you want to learn as much as you can about different types of binary options, so that you can have a diverse understanding of the trades available to you. One of the biggest attractions of binary trading for beginners is that you can choose which trades you want to make, and can do so across a huge variety of assets and securities. You can make a trade on a stock today, and make a trade on a currency tomorrow. And if you are knowledgeable about many different fields, keeping a diverse portfolio keeps you from getting into a trading slump in any one sector.
And finally, you want to search for the trades that are the most profitable for you. Brokers offer a certain percentage return on each trade, partly based on how many people take the trade and on how popular the underlying asset is. A binary option for Starbucks stock or the Euro/USD exchange rate is going to have a lower return than on lesser-known stocks or currencies because those trades are far less popular. But once you have learned to read the indicators and evaluate the asset and market conditions, you can just as accurately predict the movement of even obscure assets, and you will benefit from far bigger pay outs than with the bigger name trades.
Remember, binary trading is great because it doesn’t matter if the asset price goes up or down, you can win just as long as you correctly predict which way the price is heading. And since you know exactly how much you will win or lose, you can keep better track of your money and prevent huge losses while maximizing gains.
While there are far more things to understand when it comes to options trading strategies for beginners, if you remember to start slowly, look for the best brokers and deals, and diversify your portfolio and knowledge, you can start making money in the binary options market in no time!