What is Binary Trading?

what is binary tradingYou may be hearing more and more about binary options trading.

While it has been a form of financial trading for a while, it is only now really beginning to gain popularity. In addition to being quite recent, binary options trading is really a novel way of taking part in trading.

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While it is a little different, it does have the distinct advantage of being quite easy to understand and partake in. It also tends to be a more affordable option for trading, particularly for those who are not really seasoned traders. Here is a closer look at what binary trading entails:

What is a Binary Option?

The first thing that you are going to need to understand is what exactly a binary option is. In the simplest mathematic terms, binary describes a numeral value of either one or zero. When applied to a financial term, it essentially means all or nothing.

This is because with binary options, there is the probability of an asset either increasing in value or decreasing in value. When you make a prediction about this elevation or devaluation, either you can be right in your assumption or you can be wrong. There is no middle ground.

With binary options, you are required to pick a particular asset that you would like to place a trade with. Now, that you have made your decision regarding the asset, you will have to determine whether it is going to either increase or decrease in value.

You should keep in mind that you will be expected to choose a time period within which this spike or drop will occur. After this, it is fairly simple; if your assumption is right, you will be considered to be ‘in the money’. This means that you get all of the profits. However, if you are incorrect, you will be ‘out of the money’. Here, you will lose all of the money that you have invested.

What are the Types of Binary Options?

Now, there are many different types of binary options that you can utilize to your advantage. However, there are four main types that are used quite often. In addition to being quite simple to use and apply, these are also quite effective. The first is the most well-known and is known as the call/put option. With this option, it is essentially a matter of deciding whether a particular asset is going to become more or less valuable within a period of time.

Another one that is quite self-explanatory is the 60 second option. Here, the trade lasts for all of sixty seconds. This is typically utilized by individuals who are convinced that the value of an asset is moving in a particular direction.

The other is the one touch trade. This is when a broker provides the trader with a target price before the trades take place. If this amount is either achieved or surpassed, the traders makes a profit.

Then, there is the boundary option. With this you will be given several different prices for a particular asset. These prices form a range. The trader will then have to determine whether the movement of the price will fall within or outside this range.

Where Can You Place Binary Options Trades?

Binary options trading takes place online. There are typically either one of two ways that people engage in binary trading. The first is more pervasive than the others. Here, you will need to find yourself a binary options broker.

There are many available online, all offering unique services to traders. Some of these entities are licensed with a regulatory agency, however most of them are not. Each of these binary options brokers also require varying minimum deposits to be made into your trading account. Similarly, they may also offer varying options on the trades that you place with them. Each of these brokers will allow you access to their trading platforms. This is where all of the trades with the various assets will take place.

The other method is not one that is utilized too often but still remains a viable contender for those who wish to take part in binary trading. This is where there is no broker involved. Instead, traders simply trades with other trades.

This takes place across binary exchanges. Usually, this occurs with binary contracts. One trader takes the position of a particular trade and must wait until another traders seizes the opposing position. This is known as peer to peer trading.

What are the Assets You Can Trade With?

Just as important as knowing where to place the trade is figuring out just what you can place trades with. In this instance, you will need to understand the asset classes that you can place trades with. There are a surprisingly large number of assets that you can use in binary options trading. For instance, this includes commodities such gold, silver, and oil. There is also an option to place trades for stocks of different industries as well as companies.

On Nasdaq, Dow Jones, and FTSE, you can trade with indices. On Forex, you will be able to trade with numerous currencies including the more popular ones such as euros, pounds, dollars, and yen. With binary trading, you will be able to trade with markets that are both local as well as international.

This should provide you with a basic understanding of what binary trading entails. While it can seem a little confusing in the beginning, the concept is actually quite clear-cut. As such, anyone really can take part in binary trading.

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Page Updated: 12 December, 2016