Trading binary options is a relatively new way to trade financial markets for many traders. However, it needn’t be one which is lined with the difficulties that traders experience when they first begin trading or switch between different trading vehicles and platforms. At their very simplest they are one of the easiest forms of trading to grasp and shouldn’t be associated with the traditional image of the lavishly-expensive world of options involving a large number of contracts and very deep pockets. In fact, binary options are similar to other web-based markets such as spread betting in the simplicity that a new trader can open, and begin trading, an account within a few minutes. The notion of purchasing options is also incredibly inexpensive with minimum trade amounts of several dollars through many online platforms.
Getting used to the potential profits
Choosing whether to trade binary options is a fairly straightforward process for anyone who is looking to make between 75-85% profits on average on the regular options. Although some skeptics argue that other forms of investment may offer a higher return, there are very few markets which can result in these returns within a matter of minutes. Gone are the days when only a broker could purchase some shares on your behalf to be sold at a profit many multiples its original value twenty years later, now anyone can make a very respectable return within just sixty seconds. Choosing the expiry time on binary options does not affect the pay-out and an investor will still make up to 85% in as little as one minute if the options expire in their favour. Needless to say, binary options can provide a hugely profitable profession for those who are selective about their expiry times and adapt their strategy accordingly.
Making binary options work statistically
The simplicity of binary options is a major part of their attraction but this does not mean that they should not be regarded as the realm of the uninitiated. The fact that a binary option has three outcomes, (in, out and on the money) allows almost anyone to begin trading. If we remove the outcome ‘on the money’ (which normally results in the broker returning the stake) we are left with a 50-50 higher or lower call. As attractive to gamblers this may be, it is worth noting that the pay-out is generally always slightly lower than the potential losses incurred. Many brokers often provide up to 15% return on losing positions which brings losses down to around 85%. Once this equilibrium has been achieved, lowering the risk-reward to 1-1, traders can look for strategies where they can further increase their probability of success. One of the most popular of these is to hedge positions that have not ‘worked’ as you might have intended. This involves taking an opposite position at the entry price of a high-risk trade to lower the overall exposure to less than a 15% loss. This is achieved by opening both higher and lower options at the same time and at as near to the same price as possible.
The large choice of markets available to trade
Making binary options work for each individual trader also includes important decisions on markets, as well as the timing and strategies of each trade. This can be particularly difficult for new traders given the overwhelming number of financial markets which can be traded from just one trading platform. These markets range from traditional stocks and commodities to 24 hour currency markets and specialist trades. The decision to a specific market is purely subjective but many new traders will have an idea about what interests them and see the benefits of specialising in just of a few of the many binary options markets available and becoming profitable looking for opportunities within these.