How to Invest in Binary Options
Binary option is fast becoming a very popular way for most people to make a second living from internet. It is an easy to use financial instrument that anyone can use to make a lot of money within short amount of time. Binary options are short time investment which can last between 5 minutes and one hour or a month. The beauty and problem of this trading method is that it does carry risk. For anyone to make money using binary he first has to get adequate information and experiences that can aid him avoid or reduce these risks.
Binary options is a contract where you buy or sell an underlying asset at a given price known as the strike price on a particular date and which you expect to expire at a give future date.
Binary is all-or-nothing options. It means you have only two choices; either you win a trade or lose it. If you purchase a stock option at $50 and predict it will increase at the expiration time, you will receive a pre-determined profit if you are correct otherwise you lose everything you staked.
Before you can invest in binary, you need to understand some terms that are common in binary trading.
Below are some of the important terms every binary trader must know:
- Strike Price: This is the price of the underlying asset that you want to buy at a particular time with an expiry period.
- Call: A situation where you predict that an item youre trading will increase in price when the contract expires.
- Put: A situation where you predict that an item youre trading will fall in price at the expiration time.
- In the money: A situation where your prediction turns out to be correct and you gain money.
- Out of the money: Happens when you get your prediction is wrong and you lose money.
- At the money: This means a tie, the asset did not go up or down at the expiration of the contract and you still retain your initial investment.
- Expiry time/period: This simply means the time that your chosen option will expire. This time can range from 1 minute to 1 hour.
- A broker: This is a firm that you (an investor) enter into an agreement with; this people job is to determine the payouts and not to act on behalf of anyone.
- Investment money: This is an amount of money that you decided to risk in a trade.
Find more binary options terms definition on our glossary page.
Investing in Binary Options Short Guide
Here are guides on how to start binary option trading:
1. Binary Training The first step to take if you want to make money from binary trading is to go for training. There are videos on YouTube, PDF materials, and various trainings offer by brokers to enable you master binary option trading in a short amount of time. Get enough training and practice before you start with real money investment.
2. Choosing a Broker Choosing a broker to trade with is very important. Of course, you cannot trade binary without a broker. We advise you go through reviews of various brokers to find out which one is best for you. Each broker has different amount needed to get started and different asset you can trade. See a list with the best binary trading brokers on our dedicated page here or choose one broker from below to start trading with.
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3. What Trade to Place You need to choose what asset, commodity or stock exchange that you wish to invest on. You must make an informed decision on which type of asset, commodity or stock exchange based on your experience and training. Invest only on the one that you are most comfortable trading.
4. Choosing an Expiry Time Most brokers offer an expiry time that ranges from one minute to one hour. From experience, those longer periods are more stable for making profit. However, you need to choose an expiration period that you are comfortable with. Try doing a lot of demo trading to find out which one is best for you.
5. Understanding Potential Gains Before you consider making a purchase of a large ticket price item, you need to first shop around to make sure you get the best possible deal. Hence ensure you choose a broker that gives you an opportunity to make maximum gain from your investment.
6. Trending Options Choosing a broker is not enough; you need to be conversant with the news that affects your trading. Some brokers offer latest financial news stories which are often found when scrolling on their news feed. Another important feature is to find trending options which many people are currently using to make money.
7. Budget and Discipline You need to careful with your budget. In fact, you need a good money management/principle to succeed with any amount of budget you have. Start with small investment and keep on increasing it as you become more confident and spot profitable trading.
The key to successful investment in binary options is knowledge, the more you know about the asset, more chances you will have to make accurate predictions. Note that all you have to do in binary option is to predict if the price of an asset will go up or go down, the amount of change does not matter as far as it is in the right direction.