Introduction to Binary Options Trading

As is evident from the name itself, binary options give you the chance to speculate on one of two outcomes, whether the price of an asset will rise or fall below its current price. Simply put, it enables traders to make an educated guess about an underlying asset's price and whether it will rise or fall over a set period of time.

Binary trading is essentially a form of gambling, as it lets you predict the movement of a certain asset's price in the market and bet on it. Also, since you can never be certain about the results of this form of trading, it is deemed a high-risk investment. If you guess correctly, you earn a profit, but if you don't, you lose the money.

What Are Some Basic Terminologies of Binary Options Trading?

Before you read further about binary options trading for beginners, it is important to understand the language of binary options and know what each term means so that you have a clear idea of what is being discussed in the article.

1. Asset: It is the underlying commodity such as crude oil or gold, foreign exchange, stocks or stock indexes, economic events, etc. that you trade within binary options.
2. Strike Price: It is the original or the base price of an underlying asset.
3. In-the-money: It refers to a call option that results in profit for the investor
4. Out-of-the-money: It refers to a call option that results in monetary loss for the investor.
5. At-the-money: It means that there was no change in the strike price of the underlying asset, resulting in neither a financial loss nor gain for the investor.
6. Expiry time: This denotes the time when your options will expire and is set by the trader himself.
7. Broker: they provide a platform for traders where they can trade different binary options assets. Almost all brokers charge a fee in exchange for the services that their platform provides.

How to Trade in Binary Options?

The only complicated thing about binary options trading is learning how to analyze market trends and apply different strategies. If you want to become a trader, it is advisable to join an academy to learn trading first so that you know how and where to start. Plus, you can also read this elaborate guide to understand more about the world of binary options trading.

Otherwise, carrying out the trade is relatively simple and can be done in the following three steps:

• First and foremost, to start trading in binary options, you have to select the asset that you want to deal with. Remember, different broker platforms allow a different number and types of assets to choose from.
• In the second step, you decide on an expiration time for your bet. If you select an expiration time of one hour, for instance, the outcome of the asset after that time will determine whether you win or lose. The expiry time of an asset also varies from broker to broker. However, you usually have the choice to set the time window to your liking. If your broker platform permits it, you can go as low as 60 seconds to make quick money, or if you are in no hurry and can easily wait for long, you can choose an expiry time of a few weeks or even months. Apart from this, some brokers also provide you the choice to close your trade ahead of the expiration period.
• In the final and most crucial step of the process, you make an informed decision about the price of your chosen asset, keeping all the historical data available as well as market trends in mind. In a nutshell, you simply predict whether the cost of the asset will rise or fall in relation to the strike price at the end of your chosen expiry period.

What Are the Outcomes of Binary Options Trading?

1. When you place a trade in binary options, you get one of three sets of results:
2. If the price of your chosen asset moves in the direction you predicted, you win and earn a profit.
3. On the other hand, you forfeit your investment money if your prediction is off and the price does not move in the direction you had anticipated. The third and final potential outcome of binary trading is that you get your investment money back if the value of an asset remains unchanged.

Conclusion

Binary options trading is full of risk. But that said, you could also make a lot of money if you study the market trends thoroughly and employ the right trading strategies. Plus, the latest technology, such as trading bots, has also made it much easier for novice traders to earn profits. Therefore, if you have the money, you should definitely try binary options trading and see if you have it in yourself to become a successful trader.

Tell us your story

Would you like to write for nichemarket just like Max has? Find out how to submit a guest post and when you're ready, you can contact us.

Do you need financial help?

Find a financial advisor or financial consultant in your area

Get started with nichemarket

If you are a financial adviser and would like more leads, why not list your business with nichemarket. Registering with nichemarket is easy; all you will need is head over to our sign up form and follow the instructions. If you require a more detailed guide on how to create your profile or your listing, then we highly recommend you check out the following articles.

• How to create a nichemarketer profile
• How to create a nichemarket business listing

Recommended reading

If you enjoyed this post and have the time to spend diving deeper down the rabbit hole, then we suggest you check out the following posts about improving your finances in South Africa.

• How South Africans Can Save Money Each Month
• The Pros and Cons Of Tap and Go Cards
• What Is A Money Market Account?
• Ways To Earn Cryptocurrency
• How To Passively Earn Cryptocurrency
• Types Of Cryptocurrency Exchanges
• How South Africans Can Buy Bitcoin

Disclaimer: This is not investment advice and is for informational purposes only. nichemarket cannot be held liable for any investment decisions made based on the information given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, nichemarket disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

Tags: Options Trading, Finance, Guest Post