Your Binary Options Trading Resource

For those people who have already built up some experience in financial trading, Binary Options will probably be familiar to them. Yet for many people the term will be unfamiliar.

So what are these mysterious financial instruments known as Binary Options and is it possible to proffit from trading with them?

What Are Binary Options?

A binary option can be described simply as an all or nothing investment. There are only two possible outcomes. Of the two results you get when trading a binary option , you will either end with a succssful expiry or an unsuccessful expiry.

If you are successful you will earn the stated profit. If you are unsuccessful you will not win the stated return and will lose the amount you staked on the option. This black and white result is reflected in the types of options offered which are considered 'all or nothing options'.

As with all forms of financial trading there are risks. However the fact that you will know your exact potential for profit prior and potential liability before purchasing the option means that you make a informed decision on the merits of taking the trade.

What Markets Can You Trade?

Binary options are highly flexible and you can trade a wide range of finanical markets with most brokers. This includes the world financial Indicies (eg. DOW, FTSE, CAC etc), Forex currency pairs (eg. GBP/USD, EUR/USD, USD/JPY), Commodities (eg. Gold,Silver, Oil) and also a wide range of major stocks (eg. Microsoft, Coca Cola, BMW etc).

This wide range of tradeable markets offers something for all traders and allows for a wide range of strategies to be traded. It also means that you can move between markets as new opportunites present themselves.

What Are The Risks?

Provided you are careful and balance your risk ( most top traders recommend exposing no more than 2% of your capital on the outcome of one position) then you can profit from trading with binary options.

Their unique feature is that you know both your profit and maximum loss prior to taking a position. Therefore you can plan your trading to take only the highest probablity trades in the market. However make no mistake... trading of any kind carries risks and to be successful over the long term is going to take time and a dedication on your behalf to finding good strategies to use as part of your trading plan.

How To Trade Binary Options

Once you have found a market or asset to trade you then need to think about how much risk you are willing to take on the outcome you are going to predict Note you are not actually buying the asset or owning it at this point. You are purely gambling the performance of the asset over the next hour, day or week. You choose the time frame that you want your option to run for. 

The next decision you need to take is whether to go long or short on the asset. With a Call Option you would be buying the market in the expectation that the market will rise by the Options expiry time. Having your option expire in-the-money is the goal when trading your option. This means that you will gain a certain amount of profit, depending on the percentage stated at the time of investment. If the price falls, you will be “out of the money” and will not gain anything.

The Option Types

If you are staking on the opposite outcome then you would need to make use of a Put Option. In this scenario you are actually backing the value of the asset to fall over the lifespan of the option. A profit is made if the price of the asset moves lower than you entry price by the time the option is due to expire. Here you will lose if the price of the asset rises Normally, before you make an investment with Binary Options you will know exactly what the pay-out percentage is. This will allow you to work out your potential gains at expiry.
Cash or Nothing Digital Option will earn you a fixed percentage return as defined by the broker if it finishes 'in the money' at its expiry. In contrast, an Asset or Nothing Option will pay out on the value of the underlying asset traded. You will know exactly the potential for gains and the risk involved with each option you take. The exact amount will depend upon the value of the underlying asset.

Summary

Binary Options, like any form of investment have risks and you should bear this in mind before you start trading. While they seem simple at first glance you are going to need to devise a good strategy to be able to profit from using them on your account.

However the high returns that are on offer from this form of trading make them attractive and it is perfectly possible to generate yourself a high return from this trading medium.

Of course you could stand to risk your trading capital in a short period of time if you are unsure of how to trade or don't follow a balanced risk approach to trading. You should always do your research and be prepared - profit is by no means guaranteed and a loss is more than possible.