On of the smartest ways to make money
Binary options trading is one of the best ways to make money although it does involve a huge potential risk as well.
That is why it is so important that you understand exactly how it works before becoming a binary options trader.
In binary options, you basically enter into an agreement with a broker where you speculate on the future value of an asset like indices, stocks, commodities or forex. All you need to do is figure out whether the price of an asset is going to rise or fall. Sounds really simple doesn't it? Well it's a lot more than that.
Understanding the risk and the reward involved in binary options trading is of vital importance before you actually invest your hard earned money in it. Binary options are more misunderstood than anything else and many investors start off thinking it’s quite simple and will earn them a lot of money. There are various factors which you need to take into account including fees, payouts, risks and liquidity structures. If you are looking to hedge or to speculate, you need to consider binary options as an alternative as well. But before that, you have to understand how it works.
Binary options are sometimes also called exotic options. They're quite easy to understand as far as functionality is concerned and are even called fixed return options. Every option has a definite date of expiry as well as a strike price. This strike price is what determines the value of any options contract in the market.
This method of trading is a great way to earn money on the financial markets. All speculations are listed as ventures where assets will either open or close at a fixed price. Traders then predict whether the price of the asset will rise or if it will fall & if they get their prediction correct, they profit through a predetermined payout. But, if their prediction doesn't come true, they will get back very little money or maybe even nothing. Two very important factors to keep in mind while trading in binary options is strike price and time period.
Now let’s take a look at two similar options available to traders where you can protect your investment to a certain extent:-
1. The first type is one touch options. Here, traders are paid immediately on the expiry of a contract. But this only happens when their option reaches or surpasses their predetermined value. At the same time, if the value isn't reached, the investor loses all of his/her investment. This is a great option for traders that are good at predicting asset price movements.
2. The next is double one touch. This is a good option to follow when there is a lot of volatility in the market and no one can confirm in which direction the price of an asset will move. Here traders choose two prices & if any of the two prices are reached, the trader gets his investment back and a part of the profit. This is a great option for traders that are confident based on economic data and market reports.