Binary Options for Dummies

In short, binary options are a specific type of options with which a trader predicts the price of the asset you choose will be higher or lower than a certain price at a given time in the future (the so called maturity/expiry date). These are named “Call” and “Put” options, respectively, and have a predetermined payoff amount which the trader earns if their prediction was correct.

Binary Options for Dummies | Risk management

This means that the trader has all information regarding their profit readily available even before purchasing a binary option and can plan actions accordingly, without the stress of constant monitoring of the given market and worrying when the asset should be sold. What it all comes down to is the trader’s knowledge about the market they are interested in, i.e. the ability to successfully predict market’s behaviour. Risk and rewards are clearly laid out in front of the trader and no matter how much the market may fluctuate, it will not affect the investment any more than it is specified in the option itself.

Binary Options for Dummies | Offers

Because of the fact that the trader is focused on the market and not on the asset itself, and is never really in possession of that same asset, no liquidity issues can arise. This enables brokers to offer a wide variety of prices and expiration dates to a trader in order to provide them with more choices for investment to satisfy their demands. In general, the growing competition forces brokers to come up with innovative products to keep up with this expanding industry and the satisfaction of a trader must come first to those brokers who wish to keep up their business.

Binary Options for Dummies | Types

As a result, some new types of binaries options were developed, such as the “range” or “one touch” binary options which deal with the range within which an asset will be traded and the target price that only needs to be touched once to yield money. Yet, all of these still operate on the same principle of strictly defined risks and rewards which await potential traders, thus providing complete control of the amounts invested. Various tools are also constantly being developed in order to help traders manage their investments, and one of the most important ones are Binary Options Trading Signals.

Binary Options for Dummies | Conclusion

It should also be said that binary options usually do not come with any additional fees (although some brokers may have them) and have an extremely wide range of application because all they really need is an open market somewhere in the world. Commodities, indices, stocks etc. are generally all available for trade – whether a trader will focus on a single asset or have multiple trades open at the same time is completely up to them. Simple to use, with manageable risk involved, flexible prices and expiration dates, these instruments can provide significant opportunities for profit if the trader involved is familiar enough with their desired market.