What are binary options?
When people begin looking for ways to expand their investment portfolio or just want to make some extra side money, they quickly come across binary options. The first question people generally ask themselves is ‘what is a binary option?’. The second question they ask is ‘how to make money with binary options?’. By reading this article, you’ll find answers to both those questions and more.
Binary options are some of the most simple investment opportunities available on the market. Essentially all you have to do is decide ‘yes’ or ‘no’; if you decided the price of an underlying asset be above or below a specified price at a specified time, you say yes. If not, you say no. This is why it is called binary. There are only two choices. This simplicity is the reason these type of investments have broad appeal amongst experienced traders and novice investors to the financial markets.
How to trade for beginners
Here is a practical example of how to trade:
If you believe, based on your market analysis that the price of a specific commodity, for example, will be above $1,000 at 3 PM, you buy a binary option. If not, you sell this option.
The price of any binary option is always between $0 and $100, and just like in the stock market, there is a bid(offer) and ask(sell) price.
The binary option you are interested in might be trading at $42.50 (bid) and $44.50 (ask) at 3 PM.
If you decide to buy the option at $44.50 and at 3 PM the the price of the underlying commodity is above $1,000, your option expires and it becomes worth $100. You make a profit of $100 – $44.50 = $55.50 (less fees). In this scenario your binary option ‘expired in the money’.
But if the price of the underlying commodity is below $1,000 at 3 PM., you lose the $44.50 you invested. In this scenario your binary option ‘expired out of the money’.
How to make money with binary options trading
One the reasons for binary options’ broad appeal is that it is an accessible investment option to really anybody who is interested. If you are the type of person who possess a strong penchant for financial analysis, always up to date with the latest market news, you will have no problem leveraging your knowledge to gain high returns through binary options.
However, novice traders quite often find immediate success as well through measured strategies that allow them to build their understanding of the market while they make sound, solid investments.
Below are tips both types of investors can integrate into their general strategies in order to be well placed to make consistent profit:
Selection of underlying assets – One key to any strong investment strategy is diversification. This is the same for binary options. When signing up for a site, and as you continue to invest, make sure you have access to a broad selection of assets upon which you can invest in binary.
Leverage Membership Benefits – A simple, yet underutilized method, to increase your profits as a new investors is to take advantage of the new member signing bonuses almost all binary trading platforms offer.
Leaving while on top – Many binary trading platforms offer offer you an early exit option on any trades you have made. If you anticipate your trades will expire in the money but you still have a certain amount of time before the trade mature it is your choice whether you want to take the early exit profits, which will never be the full profits you would receive after your option matures..
How to trade with no money
If you are new to binary options, or even an experienced investor, you can improve on your old investment strategy or build an entirely new one without spending any more. That’s right, you can learn how to earn huge profits for free by opening a binary options demo account.
Almost all binary options trading platforms offer their members demo accounts. Demo accounts allow you to review real time market data as well as invest in options, just as if you were using real money. Of course, the money is completely virtual so there is absolutely no risk to you.
Generally, you will not be restricted to any one kind of asset, index, or currency pair when using a demo account, so you should be able to get a great understanding of market interactions.
How do I set up a Demo Account?
Setting up a demo binary options account as soon as you register for a binary broker platform is one of the easting and smartest things you can do, if you want to get started trading binary options in the right direction. All you need to do is visit any of binary option trading platforms listed at binary-options.trade and click the option to open a demo account. You will be prompted to enter some information. Following a minutes, you will be give your unique username and password.
When you first log into your binary options demo account you will find it comes pre-stocked with demo credits. Demo credits are essentially virtual money, you can use just like real money anywhere in the demo account.
You are encouraged to browse the availability of underlying assets. Once you have found a commodity, index, or currency pair that interests you then simply click on the Put or Call button depending on whether you think the value of that underlying asset or commodity is trending up or down, choose how much you wish to wager and then confirm your trade and wait to see what happens!
After you’ve spent enough time on the demo account to build an effective trading strategy, and you want to start trading for real money, all you need to do is to switch over to the real money version of the binary options trading platform. When you finally make your first real deposit, you will most likely qualify for a new sign up bonus!