Unlike other trading, Binary options is speculative in nature and futuristic in orientation in which either there is a good return or no return at all. It’s the condition in nature the term binary is used. It can be applied to many types of assets like stocks, commodities and indices etc.
It is the fluctuating values that keep changing the entire day during the course of trading. Due to this fluctuation, an investor can either make or lose money. It all depends on the quality of an investment decision.
This trading got its popularity due to its fluctuating nature. Also, another reason that made it popular is the low investment cost as with the number of brokers offering online services which is increasing day by day. Increased accessibility and an improved system has enabled investors to make a huge amount of money in the shortest possible time e.g. 30 seconds. This opportunity makes it more attractive as the duration of earning is so tiny.
This trade expects its investors to be fully aware of the fundamentals of trade, and avoid risk so that losses can be minimised. Any kind of speculation might prove gambling and may result into losses.
Beginning of binary trading
Following steps are required to open this trade
Associate with a reputed and safe broker for a binary option account
Put down a small investment to explore opportunities as and when they arise. Smallest denomination may be £20 to £120 or whatever you can afford.
To create a demo account with the broker which is extremely convenient.
Before jumping into a real trade, it is advisable to place at least 15 to 20 demo mode trades. It will give you a feel of the trading platform before you take a real trading venture. It will add to the understanding and confidence which is necessary to become a real trader.
By starting the process with an insignificant risk, you may become focused on making little earnings. Over time as you become more familiar, higher returns can be achieved without much risk due to the experience you’ve gained. A good strategy in place will ensure that you deal in those options where returns can be maximised.
Regular contact with your broker will further give you insights into the trade and will enable you to develop further strategies. You should look at different trading sites where valuable advice is offered and further enables you to sharpen your future strategies.
Different options for trading like Call and Put
Call and Put are two key options
Put option trade
Under put option an investor holds the right to sell any asset at a specific price. The writer or seller of the option is obligated to purchase or sell any stock at strike price. But put option must be exercised before its expiry. Any investor will buy a put if he feels that the stock price may fall or may sell if he feels that prices will go up.
Those who hold a put for a longer period are mostly speculative in nature, where as a put seller expecting a market rise may keep it for short term. Though sometimes the market may behave contrary to its expected move and a put seller may face a downward trend. You need to be careful and observant while tracking the moves of the market.
Call option trade
Call options offer the holder its right not obligation to buy an asset at a specific price also called strike price for a specific timeframe. In case the stock fails to realise the strike price before its expiration date, the option become worthless as it expires. Investors purchase calls as they feel that the price of share of underlying security will increase or sell any call if they feel it will come down.
Option selling is also called writing an option. To acquire these rights, a buyer should pay a premium on the option. This is the quantum of money a buyer gives to sellers to obtain a right which the option is granting him. A premium is paid after the contract is started.
Strategies for Binary Options
Strategies can be defined as a set of plans or measures which will help a trader to reduce the risk and give an overall and better view of the trade in the long run. This only differentiates gambling from option trading. With little experience, you can create and execute a solid strategy for risk free trading. You don’t need to be experienced before starting a trade, but just a little experience will do.
The key element is the ability to develop a correct assessment of the movement of the direction of the asset. Many times, simple strategies may prove to be successful.
You should avoid investing all capital at one time and you must know the strengths of the trading options so that correct moves can be ensured going forward.
Need for right trading strategies
A right strategy will ensure the right return. As a result, a strategy should avoid hasty decisions or also one that has an emotional element. Logical understanding must be applied while applying a strategy which should be versatile and can be analysed, adjusted, repeated and tweaked.
Strategies for money management
Money management enables you to balance your funds in a manner that you can get through rough patches and maximise winning results.
For example, if an investor doesn’t use a strategy for money management they might be a victim of losses. If in a single trade you lose 10 percent of your balance then you might require 20 percent gain to compensate the loss, likewise if you lose 20 percent then you’d need 30 percent to balance your account. This necessitates the need for money management so that the losses can be minimised and a safe trade can be ensured.
Analysis of trade decisions and strategies correction
Analysis of improvement strategy offers you an opportunity to maximise the better parts of your money management and trading strategies while at the same time correcting or removing the portions of strategies which are not working. It helps you earn more profits in the long run, and, also helps you to adjust to the changing market environment.
Without analysis of a strategy, it is difficult to improve.