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Binary Options Trading Tutorial - An Introduction

Binary options trading is one of the simplest forms of options trading in the world. The sad part though is that there aren't too many people that are even aware of such a type of trading. This is an ideal type of investment for those that like to get in and out of the market quickly and with minimum risk. It is a great way to make a lot of money fast as compared to traditional options like futures, contracts, mutual funds, bonds, stocks, etc. But before you start trading in binary options, it is important that you understand exactly how it works. That is why I have put together this binary options trading tutorial.

 

First of all you need to understand what binary options are. Like the term "binary" suggests, there are only two choices here. Either the price is going to go up or it will go down. This is like any other binary choice like, yes and no, true and false, on and off, heads and tails, etc. Binary options deals with the increase or decrease in price of stocks, indices or currencies.

 

It is very important for any amateur trader to be well versed with various terms he/she may come across while dealing with binary options. There are also multiple strategies (e.g. see Binary Prestige) which can help increase earnings and reduce risks. Once you gain this basic knowledge of binary options, you can then move on to more advanced stuff like hedging, contracts, forex markets, etc.

 

In this tutorial, I am going to discuss the two basic movements of price in binary options:

 

1. The Put Option - When a trader chooses the put option; it means he/she believes the price of the stock is going to reduce in the future. Using this option, traders are allowed to sell a stock before buying it. You will have to determine what the price of the stock will fall to at a later date. If you are correct you will earn anything between 60 to 90 % of your investment. Be careful though as the price of the stock may increase further in which case you will lose all the money you have invested.

 

2. The Call Option - This is the more common option which is used when a trader believes the price of a stock is going to increase in the future. All binary contracts are executed at their expiry which can be anything from 1 hour to 1 week to 1 month. You will have to predict the price of the stock at that future date. If your prediction comes true, you can almost double your money. But just like the put option, you will lose all your money if you are incorrect.

 

So you see, binary options trading is quite simple and fascinating at the same time. There are a lot of people that compare it to gambling though this is far from the truth. You can indeed make informed decisions and while there is no way to eliminate risk completely, you can take the appropriate measures to ensure you minimize it as much as possible.

 

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