Binary options are the most convenient type of trading stock, assets and foreign currencies. Although it gained its fame over the last couple of years, banks and investment companies have been using it for decades. Its process is very simple as it involves a trader making only one decision from two predictions. Traders need only decide if the stock, asset or foreign currency will go up or down. They make their money when they make a correct prediction. For a trader to start using this form of trading, they first have to place a certain amount of money as an investment. They can feel free to choose from the many options set by brokers, although the amount varies from one broker to another. Usually, traders can invest from $10 to $10,000. After placing an investment they find most suitable, they get to make a prediction with a time limit and when the time expires and the prediction I correct, the trader will win some profit. If they make an incorrect prediction, the trader will then lose his investment. Some brokers return a small percentage of money to the trader when the make an incorrect prediction. Either way, a trader will have lost a sizable amount of his investment.
Binary options may be very simple, however, it best for traders and people considering the ‘gig’ to understand a few things about the trade. Look at more: www.titanfx.com
1. There are only two predictions, up or down.
Traditional trading methods involve a trader to know the magnitude of the underlying asset in order to make a decision. In binary options, traders are presented with a simpler option of making a prediction regardless of what the underlying asset may be. The only thing the trader needs to do is to determine the direction of the underlying asset, and if the prediction is correct, he walks away with a certain amount of money.
2.Make a prediction within the expiration date.
A trader can only make money from making a correct prediction within a limited time. He gets to choose his time limit and make a prediction within that chosen time limit. Should the trader exit a trade before his time has expired, he may have to pay his broker a certain amount. However, there are a few brokers who let their traders exit a trade without any penalties.
3.Know the advantages and disadvantages of binary options.
Before starting any trade, it is advisable for a potential trader to learn the pros and cons of the trade. Binary options has lots of advantages including its simplicity in making prediction determined by the direction of a trade, its upfront risk to reward ratio, the ability of a trader to make profits in a bad market and multiple trading options at a time of their choosing. The disadvantages include traders losing their investment if a prediction is incorrect or did not adhere to the broker’s rules and being scammed by illegal brokers.
Before making any trades, make sure you learn the rules set by the broker as they differ from one broker to another. This may save a trader a lot of grief in the future.