Ever heard of binary options? Do you have an idea of what this trade involves? There is no doubt that it is important to understand what goes on in binary options first before investing in this trade. In binary options, a trader can only get any of the two possible results. That is, either getting absolutely nothing or some fixed monetary amount. Essentially, in binary options, you will have nothing or asset options and cash or nothing binary options. In the nothing or cash option, you will stand an opportunity of getting a fixed amount of cash in case the option expires in-the-money and in the nothing or asset option you will be paid based on the value of the underlying security.
On the other hand, it is crucial as well to remember that binary options trade is much easier than many trades in the market today. That is one of the reasons why this trade has become very popular in the recent years.
Below is a 10 steps guide to trading in binary options which, if well observed, will definitely make you a successful trader.
Steps to binary options trading
- The first thing that you need to consider is the type of asset, stock exchange or commodity that you are going to trade. The next thing is to place your prediction on how you think the value of the asset, commodity or stock is headed, up or down from the current value. That is the point where a trader has to be really wise.
- The next thing that you need to do is choose a broker that you are going to work with. This is one of the most important steps in binary options trading. There are many brokers in the market and you need to select wisely since there are those who are better than others. A good broker must be licensed and have a website that is regulated by the relevant bodies. Additionally, a good broker needs to have various assets, commodities and stocks that you can trade on. There are also various bonuses offered to new traders to encourage them but that should not be a primary reason of choosing a broker to work with. That is for the reason that even scams are nowadays using bonuses to lure unsuspecting traders.
- There are different expiry times from which you can choose the one that you are most comfortable with. There are those which will last for about 60 seconds while there are others that will take longer, about a month. Choose an expiry time that you are most comfortable with considering the various factors that could positively or negatively affect the value of the trade asset, commodity or stock.
- Understand the likely benefits by making sure that you first shop around to ensure that you get the fairest deal in the market. This will help you choose the broker with the best deal and the trade that will be most profitable; stocks, assets or commodities. Basically, you need to choose the options that will offer you maximum profits.
- Besides going for what you think will offer you high profits, you should also consider what is trending and preferred by many people.
- As you gain more experience in the trade, it is important to increase your working capital so that you can make bigger bids hence earn you better profits. This will allow you to take part in many trades, both the cheap ones and the expensive ones as well and stand good chances of making huge profits.
- You never know when a beneficial trade will be available and, therefore, you need to be updated on the same so that you can bid as soon as it comes up. For this to be possible, you should have an online trading account and a mobile trading account so that you have access to your account whenever you want to and from wherever you are.
- Open different accounts with different renowned brokers. This is where you place several bids on different trades allowing you chances of winning on either side.
- There is the roll forward feature that is fast gaining popularity in binary options. This feature is accessible to those who have a live trade and it is used to extend the expiry time on live trades. The time is extended to the next live trade period.
- Exit the market when there is need to. If you foresee that a trade might end badly unlike what you had predicted, then you can exit early to avoid losing your money. However, you will have to pay a certain amount of fee for exiting early.
Pros and cons of binary options trade
There are no many risks associated with binary options trading. That is for the reason that you cannot lose more than you had invested.
On the other hand, it is undisputed fact that one can really make good money out of binary options trading. However, you must always trade at a legitimate binary options broker; make sure that you have learned the fundamentals of binary options trading and, at the same time, use proper trading strategy.
Another advantage of engaging in binary options trading is the reality that this trade is quite easy to learn. You will basically need to predict the movement of various assets such as silver, gold, the USD etc. A binary options trading is not very different from other forms of investing such as stock and forex trading. It is however much simpler.
Binary options trade is also affordable for most traders hence many people can actually engage in this particular trade.
The best thing about binary options trading is that you will know in advance what you might lose. In other words, this trade comes with fewer risks. The payouts can however be larger. You can exit the trade as soon as you realize the value might go down unlike what you had predicted. And, that makes binary options quite an interesting trade to engage in.