Binary options are an unusual form of trading the markets. Many people haven’t even heard of them!
Binary options trading is a form of trading based on a single question:
“Did a Stock, Index, Commodity or Forex pair end up above a certain price or not, within a pre-defined time period (called the expiration date)?”
An option is a contract that a trader can buy that gives them the right to sell a stock, ETF or index at a price that is set. This has to happen within a certain well-defined time period.
If you are completely new to options trading, you need to read this free eBook by a millionaire options trader.
Why are binary options so popular?
In Binary Options trading, if you are right, you will win a significantly higher percentage of your invested money — it is often more than a 80% payout! That is extraordinarily high especially considering the very short time frames that are often used — as little as 1min time intervals!
This huge winning payout is a major reason that some new traders are drawn to this type of trading. Traders place trades based on a very simple concept which is also a very appealing mechanism in a world of ever increasing complexity.
Trading Risks
As simple and appealing as this style of trading may seem, binary options traders should have a deep and complete understanding of exactly how the system works. For example, which markets and time frames they should trade and what the advantages and disadvantages are.
The major risk factor involved with this type of trading is that if you can lose 100% of the money you invested in a binary option if you are wrong! The payout for a winning trade is never 100% (it is typically about 80%), which means that in order to be profitable you will need a win rate of greater than 50%. This is of course quite difficult to accomplish! It is best to learn from an expert!
Another risk that must be mitigated is that many of the binary option brokers are oversea’s and have had a reputation for being a little shady. If you are serious about learning to trade this mechanism, it is wise to do your research carefully and pick a verified and regulated broker.
Conclusion
Binary Options Trading can be an exceptionally lucrative trading vehicle if the risks are properly managed by choosing a reputable regulated broker and following a successful options trading expert that offers live trading so that you can learn a successful options trading strategy.
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