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Binary options trading is one of the most sought-after investments and financial assets to trade. All thanks to the simplicity – you can either make an accurate prediction and win or lose your investment with a wrong prediction.
As simple as the entire trading is, you might need a website where you can learn everything about binary options trading and how to succeed in your trading. Do not hesitate to check binaryoptions.com.
Moving forward, this article will give a step-by-step guide on how to make money trading binary options. Let’s dig in!
What Are Binary Options?
Binary options trading entails trading simplified options contracts that have a fixed reward and risk. As a binary options trader, you will pick an underlying asset, stake an amount and predict which of the two possible results will pass in a time frame.
If your predictions are correct, you will get your staked capital with an additional bonus of 70% to 85%. If your prediction is wrong, you will lose your staked capital. The most popular options in binary trading are the High/ Low or the call/ put option.
How Do Binary Options Work
As simple as a binary option seems, it is highly risky and requires in-depth knowledge of your underlying asset and the market (in general) to succeed.
The binary options trading works around these three key elements. They include:
The Underlying Market
For every trading or investment round, you need to have an underlying market where you pick your asset and make predictions. It is in the underlying market that you will make your trading.
The Strike Price
In binary options trading, you are expected to predict whether the price value of your underlying asset will move above or below your strike price.
The Expiration Period
The expiration date/time in binary is the duration of your prediction. That is the time after which your prediction becomes right or wrong.
Advantages of Trading Binary Options
Many people who prefer to trade binary options do so because of these reasons:
Defined Risk And Reward
Before you initiate the trading round, you get to know your fixed premium and fixed payout. So, you already know how much you will gain if you win and the amount you will lose if your predictions go wrong.
Binary options trading is cash settled once your prediction is right. You do not have to worry about getting stuck in a dicey position with your underlying assets.
Disadvantages of Trading Binary Options
As with every investment, the binary option has its disadvantages, and they include:
Once you enter options trading, you are expected to know that your options can expire. When the options expire, your entire investment might get triggered out of existence if they are touch binaries.
If you choose stocks as your underlying asset, you must hold the stocks for the trading period. However, you do not get dividends because it is held in options trading.
How To Trade Binary Options In Five Steps
There are five simple steps to successful binary options trading that every trader should follow. They include:
1. Know The Market Trends
As simple as it seems from afar, the trading in itself is not simple. You have to learn the rudiments of trading binary options. There are different options, and you must understand the one that suits your investment plan.
You should know the essential happenings in the market. Past occurrences, present happenings, and the projected future of the market. You should know that binary options in the United States are different from the trading market outside the US. This way, you can accurately predict what will happen in a period.
2. Pick The Market You Want To Trade
Once you know the basics of binary trading, the next step is to understudy the available markets and pick the one that suits your investment plan. It is advisable to choose the market that interests you.
For instance, on Nadex, the available assets are stock indices, commodities, forex and events. You can choose either of these and proceed to the next step.
3. Select A Strike Price, Expiration Date, And Place Your Trade.
This step is quite challenging for every trader. It is in this phase that you deploy your knowledge of the market and strategies.
When choosing your strike price, you must consider the probability and risk, then your knowledge of how the asset fared in the past and present.
Once you decide your strike price, you can choose your expiration date and time. Placing the trade is quite simple.
4. Choose Your Broker
One of the essential steps that you cannot skip in binary trading is choosing a good broker. It is advisable to choose a regulated broker with a long-standing pedigree in the market.
Ensure that your choice of broker offers a reliable binary options platform and is always available to guide you in your investment.
5. Wait For Expiration Or Close Out Your Trade
Once you place your trade, you wait patiently and monitor the trading round. If your prediction becomes accurate at the expiration period, you will get your risked capital and bonus.
However, if you see the trade going against your prediction, you can close your trade and minimize your loss.
Like the stock market where you can invest at a low cost, binary trading has a similar perk. However, the significant uniqueness of binary options trading is the ability to make profits from assets that are losing value.
It is therefore important to strictly follow these guides and engage in continuous research of the market. In addition, you should identify the strategy that works for you and stick with it. However, be flexible in adopting other strategies if you are no longer getting the desired results.