Gambling or Investing – Learn About Binary Options
Binary options are relatively new methods of investment in which there can be only 2 possible outcomes for each trade. Either the investor wins the trade and gets as high as 85% returns or shall lose the trade and will get nothing. But the advantage of binary options is that it has predetermined risk for each trade unlike stocks which can result in huge losses. In binary options if you lose the trade, you will only lose a fixed amount of money which you have invested for that particular trade. Also trading binary options do not require market expertise and is suitable for beginners. All you need is an access to internet and small amount of money to open a trading account with a reliable broker. In order to start investing in binary options, you should first understand the important terms,
Expiry Time – It indicates when your trade expires and if your underlying asset does not reach the strike price at expiry time, you will lose the trade.
Strike price – It is predetermined value an asset is expected to reach before expiry time. If the asset reaches or exceeds the strike price, you will win the trade and get huge profit.
Put option – This is used when you expect the asset price to decrease over a period.
Call Option – This is used when you anticipate the asset price to increase over a period.
In-The-money – It means the asset value has reached the strike price before expiry time and makes the trade profitable.
Out-of-the-Money – When the asset does not reach strike price before expiry time, it is said to be out-of-the-money and trader will lose his investment.
Binary options are not like gambling which is based purely on luck and not based on any skills or knowledge. If you consider binary options as Gambling and invest all your money on random trades without doing any market analysis, you will definitely lose all your money. Even when you are Gambling in a casino, you will only spend the amount you are comfortable with and won’t prefer to risk all your savings. You should employ the same rule with binary options as well and should take minimal risk. Only invest the money you can afford to lose and don’t take too much risk.
There are many ways to make money through online gambling websites. There are online gaming commissions which offer wide range of options such as Online Poker, Roulette, Lotteries, Sports betting, Bingo, Online casinos etc. Binary options are in one way related to gambling as you predict the future price by betting some money in stock or commodity. But Binary options have very low risk when compared to online gambling and if you have good market knowledge, you can easily gain as high as 85% returns on your investment. In some cases, even if you have good market knowledge you can’t consistently predict the price movement of a commodity or stock within small time frame. Hence you should always choose longer expiry time to be on safer side. Once you gain some profit using binary options, it will soon become addictive like gambling. So you should learn how to control your emotions and should not blindly invest all your money in it.
In order to invest in binary options you can follow the simple steps as below,
- Open Trading Account with Reliable broker – When you want to trade with binary options, you should first open a trading account with reliable broker like Anyoption or Masteroption. You should choose a broker without hidden charges and commissions. Also choose broker who has a mobile app and can provide 24/7 support.
- Choose an underlying asset – You should identify the asset which you are familiar with. If you have some knowledge on commodities, you can choose assets like Gold/silver, energy fuels etc. If you have a good understanding of stock prices, you can choose any stock as underlying asset. If you have knowledge on forex currencies, then you can trade against currency pairs. Similarly you can choose to trade against market indices as well. Binary options involve speculate the future price of the underlying asset and you should choose the one which you are familiar with.
- Choose the Strike Price and Expiry Time – Once you have decided the underlying asset, you have to determine the strike price and expiry time. The strike price is the value you expect the asset to reach at the end of trade. Also you can decide the duration of trade which is basically expiry time.
- Choose the Investment amount – Once you decide the strike price and expiry time, you should decide on the amount you are going to invest on the particular trade. Each option would cost certain amount and you can decide this based on your capital.
- Choose “Call” or “Put” option – Then you should choose either a call or put option depending on whether the asset price is expected to increase or decrease. If you anticipate the asset price to fall, choose the Put option and if you anticipate the asset price to increase, choose the Call option.
You should also read binary options trading news to keep yourself updated on what is happening in the market.
Binary options have a very high reward/risk profile and are considered as one of the safest forms of trading. Unlike stocks which can result in heavy loses and higher risk profile, binary options have predetermined risk and are a good choice for beginners. You should watch the market news carefully and decide the strike price once you get some important market events like US labor market report, FOMC meeting report based on economic calendar. Binary options trading is very easy to understand for beginners and is does not require knowledge of technical indicators.