Binary Options Trading Definition

Binary options trading is a simple way to make money online, The word “binary” means “having two parts” and trading binary options typically involve only two investment possibilities from which to choose. When you invest in a binary option, you will be paid a fixed amount of money at the end of the time period prescribed in the investment agreement … or you lose all the money you invested in the binary option. “ForexSQ” binary options trading experts team confuted this article for you to know what is binary trading options and how to trade binary options in forex market. You will also know about how to open account with the best binary option trading brokers.

What Is Binary Options Trading

When trading binary options in financial markets, you are basically predicting whether the value of the asset (which is the subject of the binary option) will increase in value or decrease in value during a certain period of time.

In binary option trading, an investor needs only to predict whether the price of the asset will rise or fall. If an investor correctly predicts the direction of fluctuation (up or down) of the asset’s price, he or she is paid a fixed return on the investment no matter how much the asset’s price fluctuates. In other words, the range of fluctuation is irrelevant; investors are paid a predetermined, fixed return, no matter how much the price rises or falls. If the fluctuation is incorrectly predicted, the investor loses all the money he invested.

If you think the price of the asset will go up it’s called a “call” option. If you think the price will go down, it’s called a “put” option.

For a “call” to make money the asset’s price must be above the strike price (the price at which the investor’s call or put option can be exercised) at the end of the prescribed time period.

For example, if an investor purchases a cash or nothing binary option on ABC Company for $100 with a binary payoff of $1000, the asset’s price at the end of the time period prescribed in the binary option must be above $100. If it is above that amount, the investor receives a payoff of $1000. If the ending price is below that amount, the investor loses his money.

For a “put” option to make money the asset’s price must be below the strike price at the end of the prescribed period of time and losses are realized when the price is not below the strike price.

These “call” and “put” options are considered “plain vanilla,” as explained in more detail below.

The underlying asset, time frame and “strike” price are outlined upfront in the binary options trading agreement.

Binary options trading are available in a large and diverse range of assets, including, stocks (or shares), commodities, foreign currency exchanges (forex) and more.

Investors like binary options trading because of the upfront transparency of the investment. When investing in binary options trading , the investor receives detailed information about eventual profits or losses, which means he or she knows exactly how much money will be gained or lost before actually entering into a binary option investment.

What is a Plain Vanilla Option?

Plain vanilla refers to the most basic version of any tradeable asset or financial instrument. Vanilla options can be applied to a certain category of financial instruments (shares, bonds, etc.) or it can be applied to trading strategies. Vanilla options in binary trading involve one expiration date and a specific price of the asset and no more. Vanilla options are the opposite of “exotic” options.

What is an Exotic Option?

Whereas vanilla options involve the most basic version of an asset or mode of thinking, exotic options are those that add an additional component to the transaction that makes the security more complex.

Exotic options typically vary from traditional American or European options in terms of either the underlying asset or the way an investor’s return is calculated at the end of the option period. Exotic options are much more complicated than the “call” and “put” choices of plain vanilla options.

Options can be categorized based on their expiration cycles, the underlying security which is the subject of the option or the method in which they are traded.

How to Begin Trading Binary Options

As with any other investment that could cost you money in the end, there are things to carefully consider before entering into any binary option trading agreement.

The first thing, of course, is deciding what asset in which to invest with a binary option. For example, if you buy from Golden Eagle Coin, you should also determine the price trends of that asset, the possibilities of reversing those trends and the date at which the option expires.

When choosing an asset in which to invest, consider those areas that interest you. If you have an interest in precious metals like gold, you may want to invest in a binary option in the gold market. It’s always advisable to glean as much knowledge as possible before entering into any investment vehicle that could possibly negatively impact your investment portfolio and financial bottom line.

What Assets Can be Traded in Binary Options?

As mentioned above, there is a wide range of assets in which to trade binary options.

Stocks – You can invest in binary options in over 50 of the world’s biggest and most successful companies in a variety of industries, including Coca Cola, Google and more.

Commodities – Binary options are available in the commodities market, including precious metals like gold and silver, petroleum products (oil), as well as agricultural commodities such as coffee and corn.

FX Currency Exchanges (forex) — Binary options are available in many combinations of the major currencies (most traded) in the world like the U.S., Canadian and Australian Dollars, as well as the Euro, Japanese Yen and more.

Indices – You can also invest in binary options involving indices that track trends in financial markets like the Dow Jones, NASDAQ, FTSE, Nikkei and many more.

Binary Options Brokers

As with any other investment, you will need to open a trading account and work with a properly licensed broker in order to conduct trading in the binary options market. Before finalizing your choice of a broker, do as much research as possible on the trading history of that broker or the brokerage firm that employs him or her. Before signing any agreement you should carefully read the fine print looking for hidden costs and obligations and be sure you understand all the ramifications of winning and losing binary option strategies.

Differences Between U.S. and UK Binary Options Trading

Binary options outside the United States typically have fixed payouts and risks and trades are not conducted on an exchange, but through individual brokers. These brokers make money based on the discrepancy between what they paid out on losing trades and what they collected from winning trades.

These foreign binary options are meant to be an “all or nothing” system of payouts on the date at which the option expires.

Unless a foreign broker is properly registered with a U.S. regulatory agency such as the Securities and Exchange Commission (SEC), they are not permitted to solicit binary option trading from U.S. residents.

As you can see, there are a lot of things to consider when entering into a binary option trading agreement.

The professional investors at ForexSQ are always available to answer any questions you may have regarding binary options or any other trading platform.

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The professionals at ForexSQ hope that you now understand the basics of binary option trading and that you will share our website with family, friends and colleagues through any social media devices you utilize.

Please visit www.ForexSQ.com often to gain valuable, up-to-date information about investing in the variety of platforms available in financial investment markets. As always, should you have any questions or concerns about what is binary trading and how to make money online by binary trading, feel free to contact the professional team of investors at ForexSQ.

What Is Binary Trading Options By ForexSQ Infographic Team

The professional traders at ForexSQ have created amazing binary options Infographic for beginners don’t know what is binary options trading, I hope you like it and share it with your peers.

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Now you know what is binary trading and how to make money online by binary trading so tip ForexSQ by share this article please on social media networks or blogs and let your friends know what is binary trading, Also if you want to know the difference of Binary options vs Forex trading then read here. I highly recommend to read other ways to make money online like CFD trading or Spread betting trading. The ForexSQ team has also compiled articles about how to making money online by Commodities trading, Indices trading or Equity trading.



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