Doing any kind of trading on the stock market can be a game that is exhilarating, yet potentially very dangerous. Perhaps it is because of the danger itself that many people are drawn to the stock market. As with gambling, you go in with a certain amount of money and the chance to either watch it increase exponentially or have it all taken away. So how is it possible to trade successfully, in this case with binary options? First, let’s take a look at exactly what binary option trading is.
Binary options get their name because there is only a choice between one or the other when trading (e.g. up or down; touch or no touch), and only a one or the other payout when the option expires. In basic terms, binary option trading is like making a bet on whether the price of an asset will rise or fall within a certain period of time. You are not purchasing the underlying asset, you are only making a guess about the direction of its price movement. You are making a contract with a broker with a fixed risk and fixed reward, and you are paid according to the payout offer, or the return that the binary option broker offers to you. So now that we know the basics of binary option trading, how is it possible to trade successfully?
The key is to make the right predictions. Binary option trading is basically all or nothing: if you’re wrong in your guess of the direction the price of an asset will take, then you will lose the entire amount you had invested. For example, let’s say you’ve predicted that the price of gold will go up at the end of a 3 hours period. You invest $100 in this prediction, and the payout offer from the broker is 70%. If the price has gone up within that period, regardless of how much, you will receive $170. If the price goes down, however, you will lose the $100 you invested. Binary options open possibilities for those who want to invest but do not have great funds by making the risk predetermined and giving a wide variety of assets to trade. However, as a word of caution, investors are encouraged not to place too many trades at a time as this may cause dips in their account and psychological stress. A good knowledge of the market and insights into the rise and fall of prices are necessary to trade binary options successfully, as well as nerves of steel. However, this increasingly popular form of trading has the potential to be very profitable.