A Beginner's Guide to Binary Options Trading

Binary options is a simple and user-friendly financial instrument that allow traders to make huge profits within short periods of time. The basic concepts of digital options trading are covered in this article.

This form of trading allows the trader to invest in a large variety of assets, such as currencies, stocks and commodities. Like the name suggests, the trader has two options in this form of trading. He can choose a call option or a put option.

The call option refers to a predicted increase in the price of the asset from the strike time to the expiry time. The time of buying the asset is the strike time. Expiry of the assets may be within a day or an hour. Thus, this option refers to an appreciation in the value of the asset. Conversely, the put option refers to a predicted decrease or depreciation in the price of the asset within a particular window of time.

Traders who trade in binary options have to consider three important decisions in order to attain success and profits.

They should choose their asset wisely. Digital options allow traders a variety of assets to trade in. They should choose assets for which they can find stock information through websites like CNN Money or Yahoo Finance. Beginners should ideally look at popular assets, as they are easier to predict. However, none of these can guarantee success. Traders have to take calculated risks in this form of trading as well.

Traders are required to choose from an hourly or a daily expiration time for each asset. This is important as volatile assets are likely to change value very fast. They are difficult to predict and traders should take care when choosing an expiration time for these assets.

Traders should also manage their money and choose the investment amount carefully. Binary options gives up to 75% profit in case the asset ends in-the-money, which is more than foreign exchange offers. However, there is always risk involved in trading.

New traders should start with smaller investment amounts to gain confidence and avoid large losses. As they gain experience, they can increase their investments and their profits. The keyword in binary options trading is information. Well informed traders can predict asset directions more successfully than ill-informed traders. Mainly, traders should gain respite in the fact that they do not need to predict the rate or amount of change.