Binary options are a fairly new (and controversial) means of trading in the financial markets, in recent years they have rapidly evolved to become one of the fastest and easiest means of trading. These options are different from most other forms of negotiation in that the participants do not take ownership of anything. Instead, they are simply trying to predict the direction of the price of the asset underlying the binary trade.
The most basic form of binary options trading involves only two directions to potentially predict correctly. Whether the underlying value will go up or down is the only question traders should try to answer in this scenario. They are “all or nothing” operations, with no confusing gray areas in between. This makes them much easier to understand. Once traders come to their final conclusion on the direction of the price, they can mark the value and see the percentage of return in that scenario if they are correct before actually committing to the trade. This means that traders know exactly how long they have for the trade to work, what the maximum profit point is, and what the maximum amount of loss could be (total invested). The simplicity of this idea attracts countless operators.
Binary options allow you to trade any of the major cross currency pairs, stock indices, many individual stocks, and commodities such as gold and silver. This means that all these instruments, from the British pound against the US dollar, to Apple stocks or gold futures, can be speculated from a single, unified and cohesive platform. Eliminate the need to move around on laptops or computer screens while trading internationally, without having to switch from one broker to another. This is especially true because a large number of the best binary options brokers have a wide range of stock indices and individual stocks from the US, Europe and Asia. This allows international operators to use their platforms without difficulties or obstacles. This makes these brokers a one-stop-shop for binary options trading.
It is important to remember that, with these forms of option trading, each trade will carry a specific timeline that the trader must pay close attention to in order to make a profit. Shorter or longer periods of time can be established, depending on the markets and the instrument in question. For those who are bothered with having their funds committed for a long time, there are 5 minute options and even 60 second operations. Those who prefer to have more time for the operation to be successful, can enter into operations of several hours and even days. These expirations can be changed as many times as the trader wishes until the trade is executed. At this point, the time constraint is immutable. Most binary options do not allow traders to sell early, either at a partial profit or loss. Instead, they have to wait until the option expires to realize their full profit or loss.
There are three different types of binary options. They are those described above, as a basic purchase or direct sale option. Will the price go up or down at expiration? The second type is known as one-touch operation. In this binary option, traders select a target price before executing and committing to the trade. If the underlying asset “touches” that price or exceeds it at any time during the life of the transaction, even once, the investment is considered to be profitable. The last type is called a limit operation. In this scenario operation, the broker supplies a price range to the traders. Traders have to decide whether the price will fall within or outside the range provided at expiration.
There are also several creative variations of these three types of operations, along with some exotic versions that offer higher returns, even 300%. Some of them are one-touch trades with far target prices. Although the odds of the underlying asset reaching that price are considerably lower than with a closer target, the potential returns can be in the hundreds percent if traders are indeed correct in their prediction at expiration.