If you have been trying to get rich online, you have probably heard and even tried binary options. Still, most of those who tried binary options in the past, don’t actually understand what they really are and how to trade them properly for a living.
Experts say that binary options have a number of advantages over Forex or some other conventional financial markets. Binary options are an improved version of conventional assets like currency pairs traded by Forex traders.
OK, let’s take a quick look at binary options to find out why they are better than old-school financial trading (currencies, stocks, commodities etc.). Binary options came into existence the way they are now (as legal financial assets) in 2008. Since then, the popularity of binary options among internet users has been growing exponentially.
In order to become good at trading binary options, first you should learn to predict the direction of the future price move most of the time. In order to make it clear for you, let’s consider an example. Let’s assume that we have chosen a certain asset we would like to trade. It has a certain price, which is constantly changing over time. Given the fact that the price is influenced continuously by external factors, the trader needs to predict in which direction the price is going to move next. Simply put, is it going to be above or below the current price a certain amount of time later (the time is called expiration)?
If you fail, you lose the investment. If you happen to be correct, you get paid instantly after the binary option expires. Usually traders get something between 60% and 90% on top of the invested amount. As you can see the very algorithm is fairly simple. That’s not rocket science. The core thing required to succeed in this business is to be correct most of the time. However, this requires training.
Even though you basically trade the same conventional assets (currency pairs in this case), binary options still have a number of differences from the conventional Forex market as we know it.
Firstly, binary options are simpler and easier to trade. You need to choose between 2 options (which is why they are called binary).
Secondly, the risk and payout are known in advance, and the payout is considerable enough to make money. While Forex traders have to measure their risks and potential profits in certain amounts of points the price may go both ways, those who trade binary options don’t care about pips. The only thing the need for the price to move at least 1 point in the favor on expiration. And that’s it! Whether the price moves 100 points or 2 points, the profit is the same fixed percent of the invested amount.
As for risks, Forex traders have to place stop-loss orders to avoid unexpected losses. However, sometimes those SL orders may get executed at a worse price or even rejected as the result of a certain breakdown. With binary options, you always risk the amount you have invested. This means that you can be 1005 sure that you won’t lose more than the amount you have invested, no matter what is going on with the price.
