Binary Options Definition

Before the trading process starts, every even beginning investor should be aware what binary options really are. That’s exactly what we are going to explain in this article. Binary options are very similar to regular ones, yet there are still some distinctive features. For instance, binary options have a specific expiration date – time, by which predictions should be made or they will simply expire. Apart from the expiration date, there is a presence of a strike price – fixed price at which this or that contract can be bought or sold.

Pros and Cons

The biggest advantage every trader comes across is the opportunity to bet on a huge variety of assets, such as: Forex currency pairs (USD/EUR), stocks and shares (Google, Microsoft), commodities (silver, gold, oil) etc.

Another biggest plus is that the trading options process is very simple. A binary option trader should just invest the money on a certain prediction (guess its direction) and in case if everything goes right, the trader gets the invested money back plus the payout percentage.

Yet one more pro is that the investment a trader can make, can be as low as $10. It gives a lot of inspiration for beginners. Making little investment and gaining experience at the same time will later lead to larger investments and consequently profits.

The only con that can happen is the loss, in case of which all the invested money will be lost.

Binary Options Trading

Starting explaining this process from the very begging, one should mention that the word “binary” means “two” – 2 possible ways of outcome. Either an investor wins everything plus commission from the contract or loses everything. It is very important to remember that binary options trading is always a 50-50 game.

To begin with, you should go to a broker or brokerage company where they will propose you a wide range of assets to trade on. After that, brokers will take a deposit from you. This doesn’t mean they take it as their payment, it just means that you are financially stable.

After that a bet on a chosen asset should be made. It can be predicted that an asset’s value will move up or down. After the expiration date, the outcome will be known.

Profits

Profits are calculated at the end of the expiration time. And as it was written above, in case of winning – a trader get the invested money back + commission; in case of loss – a trader loses all the invested money.