Trading Binary Options for Dummies
Going on the stock exchange or using other financial instruments as been seen as something that only professional traders are able to do. Indeed, buying and selling stocks usually involves a significant cash outlay; something that most people are simply not able to do. However, since 2008 binary trading has become a recognized and accepted alternative; the market is now well regulated and offers a fast and relatively easy way to make a good rate of return from your investments. One huge benefit of binary trading is that your losses will never be greater than the amount you invested; a situation which can often happen when trading on the currency market.
In fact, a binary trade can be completed in as little as thirty seconds, although most take a little longer. It, therefore, makes it possible to see a rate of return on your investment of between thirty and ninety percent, just minutes after having made the investment. All you need to do is decide what the price of the asset will do within a given timescale and invest your funds accordingly.
It is essential to register with a broker before you are able to trade; with over four hundred brokers offering their services there will be one which suits your needs! Once registered you will find that there are three main options to trade in:
This approach is often referred to as the high or low, although it can be simply called price direction. To enter this type of trade you simply decide whether your chosen asset will increase or decrease in price within the timeframe of your trade. If the price is going to increase then place a call option; if it is likely to decrease you will need a put option.
To profit from this type of trade you must be able to predict a price accurately. In essence you are either setting a price than your chosen asset will reach, (the price can be above or below the current price). If the price does hit your specified price you profit from the trade. This type of trade is also known as touch. It is even possible to trade the opposite, the no touch. In this instance you choose a price which your asset will not reach; the closer this is to the current price the higher the risk and the higher the reward.
In this type of trade you will need to specify a higher and lower price level. You can place what is referred to as an in trade; this will create a tunnel in which the price of your asset must stay. Alternatively you can specify that the price will end up outside of this tunnel; within the established expiry time. In either scenario if your prediction is correct you will win the trade and collect your agreed rate of return.
How to get Started
Sometimes the most daunting part of any new situation is getting started. Fortunately it is easy to start trading in binary options. The first step is to choose your broker; you may find reviews and advice from your friends helpful when doing this. You will then need to complete a few simple steps to create an account; this will need to be followed by funding your account. Every broker has a minimum limit which you will need to add; it is best to check their terms and conditions before signing up.
Once you have added your funds you can study the list of available assets and choose the one you wish to trade in. To enter the simplest of trades just decide which direction the price of your asset will head in and then select the trade. You will need to confirm how much you wish to place on your first trade; you can then wait until the trade is complete and, if you were successful, collect your return on investment.
The key to successful trading is to do more than place simple trades. You need to understand the variety of assets which you can choose from, the different strategies which can be used, and, the affect a price rise in one asset has on another asset. For instance, a strengthening US dollar will often mean a reduction in the price of US gold and other precious metals. Oil price and availability can also serious affect some currencies. To trade successfully you must understand the asset you are trading in.
Economic events can also seriously affect the normal pattern of price movements. In particular something of global importance can cause many markets to drop in price. To trade properly you must be aware of when economic date is set to be released and how it can affect your assets.
There are many different strategies which you can try without risking any funds. Simply research and understand the strategy and then pretend to invest in an asset. Once you have simulated the strategy and are confident you understand it you will be able to try it for real. The more strategies you develop and learn the better your trading range and success rate will be.