Binary option trading is seen as one of the simplest forms of trading out there, because it’s simply betting on whether are not the value of an asset will rise or fall at a certain time frame. Another reason why people like this type of trading is because of the great risk/reward ratio and other factors in binary trading.
Trading with Binary Options
When signing up with any broker site, you will be asked to make a deposit (average minimum deposit is $200). You will then want to choose an asset from one of the following categories: currencies, stock, indices, and commodities. After choosing your stock, then you are ready to make an investment. Brokers tend to have minimum option sizes and maximum option sizes, in others work a minimum and maximum amount of money you are able to trade. Usually the minimum ranges $1 -25$, and the max usually ranges from $1,000 to $20,000, sometimes over. You have to place a bet on the position of the asset by the expiry time. If you think the asset will move above its initial price, the “Strick Price,” then you will would place your money on the “Call” option. If you think that asset will fall below it, then you will place your money on the “Put” option. If the asset moved according to your bet, then you are “In the Money” and will gain back your investment plus a percentage of the profits set by the broker (average is 80%). If it does not move as you predicted, then you are “Out of the Money” and will lose your investment.
How do broker sites turns the risk/reward ratio in your favor?
Broker sites offer many features when signing up with them. Although these features offer no guarantee that you will win every trade, they do however help minimize loss and help clients educate themselves on strategies, tools, and how to make wiser decisions.
Risk Free Trades
Some broker sites offer a number of risk free trades when you first sign with them. These risk free trades are great for new traders to use as a way of introducing themselves into the world of binary trading without much risk. You’ll invest into an asset like you would normally do when trading. If you land “In the Money,” then you will gain the profits. If you are “Out of the Money”, then you are able to keep your investment. Traders will only get a few of these, so they must be used wisely.
Sell and Take Your Profit
Some brokers allow you to sell your option before the expiry time and take some percentage of profit while you are in the money. With this feature, you can gain some sort of profit instead of losing your investment all together.
Many traders fail to educate themselves on binary option trading or strategies, which could help them minimize loss and increase their chances at winning. Due to the lack of education, many traders either end up losing more than are winning or not winning as much as they could. Broker sites offer some free educational material to account holders, and will offer more educational opportunities to advanced account holders.
Tools and More
Broker sites also offer tools their clients can benefit from when participating in binary option trading. One tool brokers offer their clients is a control tool that will monitor your option for you, so you don’t have to watch your option trend 24/7. This tool allows the trader to set the minimum amount he is willing to lose and the maximum amount the tool can sell the asset for. This tool will help you minimize loss and gain more profits than you are losing investments.
Some brokers offer a tool where you can monitor how your option is doing, and you can make additional investments for the same assets and with the same expiry time. If you use this tool responsibly, you can increase your profit.
With any form of trading there are risks, but the best way to lower these risks and increase your profit is through finding yourself the right broker, educating yourself, and using the features, strategies, and tools provided.