Binary Options Trading For Beginners
Binary Options Trading For Beginners
Finding better, faster ways to make money is the preoccupation for many people, and different solutions abound for this problem. One of the more recent alternatives is a form of investment known as binary options trading. It’s pretty new, but also very accessible, and, unlike the traditional forms, doesn’t require you to already be wealthy, or live in some big city of the world like Tokyo, London or New York. Binary options trading can be done by anyone who has an Internet connection and a willingness to learn.
If this is something that sounds like it might appeal to you, but you want to know more, that’s where we come in. The basics of binary options trading aren’t that difficult to absorb, and we’re here to introduce you to the highlights.
The Starting Point: Options Trading
Before there was binary options trading, there was its ancestor, options trading. Options trading was a variation on traditional trading. You still bought things, and you sold them at a later date, hopefully for a profit. But options trading differentiated itself in one interesting way. It set up conditions for acceptance at the time of purchase or sale.
Let’s look at a very simple example of how an options trade works. If you’re interested in a house, you find out what the price of the house is and, if you can afford it, you pay for the house and eventually move in. If you have a house and you want to sell it, you put it up at the desired price and then hope someone comes along and makes an offer. If you’re lucky, they may offer more or, if you’re desperate and they know it, they may offer less.
Options trading is different. In an options trade, if you’re interested in buying a house at $100,000, you would make an offer, but you would offer to make an initial payment now, in exchange for purchasing the house at the agreed upon price for the remaining amount at a later date. This means that even if the house is later discovered to have been owned by a famous artist, and the value of the home is worth far more than $100,000, because of the option you took out, the seller must honor the agreement and sell you the house at the agreed upon price. On the other hand, if it later is discovered that the house is built on a sinkhole and the value is much less than $100,000, you don’t have to purchase the home at the agreed upon date, but you lose your initial deposit.
Selling is something similar. With options trading, if you were interested in selling something, the price would be locked in for a transaction at a later period. So, going back to our house example, even if homes in the area all dropped in price, because of the options trade you have in place, the buyer would need to pay the agreed upon price from before, or give up the initial deposit.
The Binary Aspect
Binary options trading is an evolution of options trading, but no longer involves buying and selling actual assets. Instead, binary options trading is known as a “speculative trading” system. It means that instead of investing money in an actual asset, you invest money in a prediction about how the asset’s price will perform. In a way, it’s analogous to betting, only instead of betting on which horse will win in a race, you bet on how the price of stock like Apple, a currency like the Euro, or a commodity like gold will do on the market.
If your prediction is correct, then you make money pegged to a return that is specified in advance, anywhere from 70-90%. If your prediction is wrong, then whatever money you put up for trade is lost. So, if you make a binary options trade predicting that the price of petroleum will go down, and you invest $1000 in that trade, at 85% return, then if the price of petroleum does go down, you make $850 in profit.
You Trade Yourself
Binary options trading distinguishes itself by making YOU the trader, not assigning this task to some broker who executes your orders. You’ll need to sign on with a broker in order to open a trading account where money specifically intended for trade is deposited. You will never have money taken directly from your other personal bank accounts, only money in your specified trading account will ever be used. This is also where profit from your trades will be deposited, for eventual transfer to your preferred bank accounts.
Once you’ve signed on with a broker and opened your account, you will be issued trading software. You’ll need to learn how to use this software, and take advantage of the features it offers. If you’re looking for convenience, some trading software even has mobile versions that let you conduct trades from your phone.
Once you’re set up, you’re ready to trade. But you should take the time to study about the different markets and financial investment strategies if you’re serious about consistently profiting from your trades.