The popularity of online trading platforms has exploded in recent years. The types of platforms we refer to are mostly independent of global markets, except for those that allow you to trade commodities or currencies online, for example. The independent platforms often take the form of spread betting and are also available online. Binary trading illustrates this example.
Such platforms have become popular online because they have provided a genuine opportunity for those who are not financial experts to get involved in the markets and make a profit from their activity. In most cases, all that is required is simply to open an account followed by a quick telephone conversation and a guarantee of solvency.
What is Binary Trading?
Trading binary options differs from almost any other type of transaction or investment available on a platform. This is due in part to the fact that binary options offer an all or nothing type of trade. Those familiar with binary code know that it is a succession of ones and zeros. When you trade binary options, you will lose your bet – zero – or you are guaranteed a full return when you buy the option – one.
To start trading, all traders or investors have to do is decide whether the price of the stock, commodity or currency they are working on will go up or down. They will therefore position a buy trade (for a rise) or a sell trade (for a fall) and recover or lose their investment based on the price movement over a predetermined period of time. The return is either 0 or 100 percent per unit, regardless of the currency or product used by the trader.
Most online platforms offer a range of markets in which to trade equity options, including equity indices, international currencies and commodities.
How do Binary Options trades work?
Once your account has been opened and you are in a position to start trading options, you can initiate your first trade.
You’ll understand what we were referring to above. Your binary trading platform will ask you a simple question. For example, “Will the price of copper cross the 1000USD mark at 3pm”? So you decide to assume that the price will indeed rise, supported by studying some charts and your own knowledge – we trade and invest, we’re not in the casino, keep this in mind – and then you make your decision.
The online trading platforms you use will tell you the return in case you place a trade for sale or purchase. Although trading binary options is not a form of gambling, you will realize that the most popular results often offer lower returns. For example, if you’re looking for gold option trades at the end of the year, when the price of gold rises in an almost traditional way due to higher demand over the holiday season, you can expect lower returns on buy trades since the increase is absolutely predictable.
It is important to realize, when starting out in binary options trading, that you do not buy options based on the price of the stock, commodity or foreign currency. The option is made available, or you have the option to set the price at which you want to buy. You are trading against the fluctuation of the market price of whatever product is being traded, not on the price itself.
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