Trading in binary options involves understanding how to invest and profit in a market riddled with price fluctuations on a global scale. It involves understanding all about risks and rewards of these often controversial and confusing financial systems noting how these options bear a very little or any resemblance to traditional trading.
Confused? Let’s start from the beginning.
Binary options refer to the instruments of trade used in fixed-return or high-low options that provide traders with access to indices, stocks, foreign exchange, and commodities. The options come bearing exact expiration dates, strike prices, and time. To profit, you have to wager correctly as per the market’s direction and at a price set at the time of expiry. You earn a fixed return depending on how the traded instrument moved during the transaction. Incorrect wagers equal losses.
Note that as a binary trader, you buy a call when you are bullish on an index, stock, currency pair, or commodity, and you put on these instruments when in a bearish environment.
Types of binary options
Whether you choose to work alone or you engage the help of a digital strategy and consulting professional, you must understand the main types of binary options.
Up-Down or High-Low – this is the most common option on the market, and traders get to decide whether the traded options (price) will finish trading at a price that is higher or lower than the current price at expiration time.
In-Out or Range-Boundary – the option sets a low and a high figure, and traders get to decide whether the price will complete outside or within the levels or boundaries set.
Ladder – the ladder options behave similarly to the regular Up/Down trade, and instead of using a current strike price, the ladder uses preset price levels which are laddered up or down progressively.
Touch/ No-Touch – these options have set boundaries/ levels which are either lower or higher than the current price of the options. A trader needs to predict if the actual price will touch/ reach those levels at any time between the trading time and expiry. With this option, a trade can close before the expiration time.
While some traders are making significant earnings from trading in binary options, others are not faring too well, giving up on the trade almost immediately they get in.
So, what differentiates the consistent and successful traders from the unsuccessful ones?
Willingness to learn
To profit from binary options, you need more than luck. You should be willing to study literate and case studies to know how best and where the best place to put your money is. To be the best investor or trader, you must educate yourself all the time. Learning about new brokers and trading strategies will get you ahead.
This is a big one. You should never get into trading in options expecting to double your investment in hours. This is a high-risk trading option; you will earn some and lose others. So, learn to manage your expectations.
The first couple of months will be tricky. As you manage your expectations, don’t put in too much money. You don’t want to lose it all at once then blame bad luck!
Keep in mind that in the world of binary options, the reward will be less than the risk, and the market is highly unregulated so that anything can happen and you’ll only have yourself to blame.