The Ultimate Beginners Guide
This kind of trading is different from traditional trading, and you should understand the risks and rewards involved. In this guide about the basics, we'll take a closer look at binary options trading for beginners, what assets you can trade and why some might be better than others, also how traders can benefit from using this trading method.
Trading in financial markets can be challenging and risky, especially when it comes to rapidly changing markets like Forex. Forex is the most liquid market in the world and represents a turnover of more than $5 trillion per day. And although you can potentially make a profit, you can also lose a lot of money if you don't know what you are doing.
Enter binary options trading! Binary trading gives you a choice between two chosen outcomes, basically predicting what you think an asset will do or where its price will end up. In addition to trading in Forex, you can trade with a variety of other assets too. You can trade with commodities, stocks and indices as well.
In this guide, you will learn:
- How to trade binary options successfully
- Which assets are easier to trade with
- Why a systematic approach makes money
What Are Binary Options
Binary trading has become very popular with traders as it's potentially easier to make a profit. In basic terms, you have only one of two outcomes, and this new investment venture is very attractive to beginner traders. Trading is available to the public and experienced traders alike, with various online platforms available for traders to use. It's also the perfect option for previously disheartened investors, especially those who took a hit during the global financial crisis in 2008.
Binary trading spans all significant assets. These assets include commodities, indices, stocks and currencies. It's much easier to trade with compared to more traditional methods and does not require a substantial investment. You can also make a decent profit on the values of an asset in a relatively short period, sometimes in minutes. Since the profit potential is quite good, you can have a significant return on investment (ROI), especially with the right broker and platform.
Binary trading requires you to predict that an asset will either "put" or "call".
How to Start Trading
Binary trading requires you to predict that an asset will either "put" or "call". When you predict a "put" options, you predict that the value of an asset will fall. When you predict a "call" option, you predict that the value of an asset will rise. The first step is to choose the asset that you will be trading on. The more familiar you are with the market, the better your chances of making the right predictions.
Advanced traders can make use of a "Touch" or "No Touch" trades. This strategy is used to benefit from trending behaviours of specific stock market prices. Touch options give traders a competitive edge as they can analyse and read market indicators before deciding on a trade. Additional advanced techniques involve using auto trading robots and other smart software.
As a trader, you are not required to buy the asset you want to trade with; you only decide whether the price of the asset will go up or down during a specific period. You put money on your prediction, without having to buy they stock option. The fact you don’t have to purchase physical stocks is why binary trading is so popular among traders.
What Assets Are Available
As mentioned, you can trade many different assets with options trading. Popular asset types include indices, Forex, commodities, and stocks. Let's go over each of these in more detail.
Indices are one of the most popular assets among traders. These indices include Nasdaq, FTSE, Dow Jones, Hang Seng, and more. One benefit that attracts binary options traders is the fact that you don't have to purchase shares in any of the listed companies, nor do you have to deal with stockbrokers.
Forex represents all major currencies like USD, GBP, AUD, EUR and more. There is no limit on the number of currency pairs you can choose, and some platforms offer you the ability to trade in many exotic and minor currencies as well. You may even decide to pair Bitcoins with UK pounds; Bitcoins is not regulated but can be traded internationally and by any central bank or government.
Commodities are also very popular for binary traders to trade. Physical commodities include gold, silver, coffee, oil, and more. You will predict whether the value of a commodity goes up or down. Binary options trading is popular on commodities since buying a unit of these can be expensive and can also lead to other costs such as security and storage.
Stocks options represent some of the most notable companies in the world, including Google, Coca-Cola, Facebook, and so on. Public opinion highly influences stocks meaning, prices may fluctuate quite often. Due to these substantial fluctuations stock trading a bit riskier than some of the other assets on offer. Still, it offers many advantages, such as the fact that traders do not have to buy or own any shares to profit.
How to Make a Profit
As you may have worked out from reading our binary options beginners guide, the best way to make a profit from is to take a systematic approach and make informed decisions. If you are a beginner, be patient, pick one of the best brokers and start small. You need to come up with a profitable strategy to ensure that your possible losses stay small while you work toward more substantial gains. There is no big secret to success, only to follow proven, simple guidelines.
Binary options traders will tell you to diversify your trades. Do not work with a broker who does not allow you to choose your trades according to your specific needs. The smaller the number of available assets you have, the more you limit your potential profits. The available assets are a vital part of binary options basics.
If you choose to trade Forex options, you have the potential to make a lot of money if you are early. There are many events during the day that can influence the value of a specific currency. You should have access to the latest news and react when you get a tip.
Jacob has been an author for us since our launch in 2012. He has over forty years’ experience in the financial sector and has held a variety of positions within financial services corporations and venture capitalist organisations.