What is Binary Options? How to trade Binary Options?
Binary Options trading is a new and simple to understand the financial trading product. The traders have to predict the price direction of an asset correctly to make a profit in a trade. The prediction is done on the value of a financial asset (EURUSD, GBPUSD, GOLD, OIL, SILVER, etc.) over a defined period of time. This kind of Options trading provides a fixed deadline for expiration and a fixed payout for winning a trade. Binary Options trading has just two outcomes for any trade WIN (ITM – In The Money) or LOSS (Out of The Money). When you predict the price would go UP, you have to invest by clicking CALL. If you predict that the price would go DOWN, you must click PUT. The trader makes a profit when the prediction of price direction is correct, and loss if it is incorrect.
Binary Options trades have limited risk. This means traders know how much they are risking in trade in advance. Fixed returns based on a percentage of the initial investment are also known in advance for a profitable and successful trade.
This makes understanding and trading Binary Options very simple!
If you win a trade, you get up to 95% return on your investment. But if you lose the trade, you lose 100 % of the investment amount. And some brokers refund you for a trade expired in a tie.
If you predict the price of Gold or Silver will increase in an hour, and your prediction is correct, you win a fixed payout. If the price of Gold or Silver drops, you lose the entire amount of the investment. It does not matter whether Gold price exceeds the original price (called the strike price), by $0.05,$1 or $50, the payout is the same.
You can trade Binary Options over hundreds of financial assets from around the world. It is not just gold or EUR/USD. These assets include currencies (Forex), indices, commodities, stocks.
If you predict the price of USD/JPY will increase over the next 1 hour. USD/JPY is currently trading at 120.485 and you invest $100 on the trade. Since you predict USD/JPY will increase you select the CALL button. If after 1 hour USD/JPY is trading above 120.485 as you correctly predicted your trade will be automatically closed by your Binary Options broker for a profit. In this example the return is 85% so your profit on a $100 investment is $85 ($100 x 85% = $85). You have received an 85% return just for predicting that the value of USD/JPY will be higher in 1 hour.
If EUR/USD is trading at 1.02052 and you predict the currency pair will be lower in the next 5 minutes, and you want to invest $10? Find EUR/USD in the brokers’ asset list, select 5 minutes, enter $10 as an investment amount. Now, click on the PUT (SELL) button, and the trade is executed. The return on this trade is 95%.
You’ve now predicted that the currency pair EUR/USD will be lower than the current level of 1.02052 in 5 minutes.
After 5 minutes, EUR/USD is trading at 1.02012, lower than the price 5 minutes earlier, when you entered the trade. Your trade automatically closes by the broker for a profit after the expiry of 5 minutes. Since EUR/USD was trading lower as you predicted your trade is closed for a profit (known as in the money). The profit for a $10 investment with a return of 95% is $9.5 ($10 x 95% = $9.5) which is credited to your broker account almost instantly.
If your invested amount had have been $100, you would have made a profit of $95 on just this single trade.
There are different expiry times to select, starting from 30 seconds to up to 5 minutes in the Turbo Trading option. Expiry times of 10, 15 minutes, 1 hour, and one day, end of the day, are also available with many binary options brokers. Check out more about Binary Options trading in India.