This is the most basic question that individuals who are interested in the binary options market tend to ask. While binary options trading might come across as something that is very complex, it is actually not, especially once you understand the basic premise under which binary options trading operates.
The word binary – means two and binary options trading generally puts the trader in a place where they have to make a decision between two choices.
Binary options trading involves the movement in the value of stocks, commodities, assets and forex on a particular stock exchange.
The trader has to make a Yes decision – generally referred to as a Put Trade or a No decision – generally referred to as a Call Trade on a particular trade. The trader has to decide if the asset they choose will go up or down within a stipulated period of time and then decide to wager a certain amount on the trade.
Binary Options Trading
So if the trader wagered that the amount of a particular asset will go up and the asset price does go up at the end of the stipulated period, then the trader has won the trade and will receive the amount that he was promised when he placed the trader. If the trader wagered that the amount of a particular asset will decline within a stipulated period of time, and the asset price drops accordingly, then trader also wins that trade.
However if the concerned asset price goes down when the trader called up, or goes up when the trader calls down, then the trader loses that particular trade and the money wagered on it as well.
Before a trader places a wager, the trading software will give them clear instructions as to how much money is being wagered, what is the stipulated end time, what is the expected return on investment and any other terms and conditions that is attached to the trade.
The binary options trading market is exciting because the window of trading is extremely short and results are always guaranteed one way or the other. Some trading windows can be as short as 60 seconds and go up to a week or so.
Top 5 Steps To Follow When Deciding To Trade Binary Options
Choose A Good Binary Options Broker: Choose a regulated binary options broker that has a good reputation in the market and one who is willing to give you a free demo account.
Make Full Use Of A Demo Account: Do not go straight into live trading especially if you are a new trader. Make use of the demo account as it will help you get accustomed to the binary options trading platform and also allow you to play with virtual currency. This means if you make mistakes and lose a demo trade, you do not lose real money.
Develop A Robust Strategy: You need to decide how much money you are going to invest initially, what commodities you would like to trade with and the average return on investment you are looking to make. More importantly stick to this strategy when you start live trading.
Start Small But Think Big: We advise you to start your binary options trading journey by investing small amounts and testing your strategy. A lot of traders go all in during their first few days, looking to make it big and end up failing. We advise you to start small and think big. Once you start winning small trades, you can increase your wagering amounts.
Withdrawals: Binary options brokers will do their best to prevent you from withdrawing your winnings. Do not get swayed by their arguments. If you have a strategy to withdraw a certain amount each week or each month, then stick to that strategy.