What Are Binary Options?
Binary options trading is a new investment venture that anyone can use to easily profit from the price movements of a wide range of dynamic stocks, indices, currency pairs and commodities. The major reason why trading binary options has become so popular as quickly as it has is because option traders only have to make one of two possible trading decisions when placing a trade – Yes or No. This dual choice is what gives this type of trading its name, and is also why most binary trades are referred to as ‘Call or Put’ trades.
As a trader, you are not required to purchase the actual asset; for example, if you are placing a trade based on the future value of gold, you only decide whether the price of gold will rise or fall in a specified time period and you simply put money on your prediction without having to buy physical gold bullion.
Binary Options Trading Defined
Because binary options are so simple to understand and to trade, they are quickly becoming among the most popular platforms in financial trading. Binary options are referred to by a large variety of names, including two-way options, barrier options, fixed-return options, digital options and all-or-nothing options, among many others. In addition, Investopedia, one of the world’s most respected trading information websites, defines binary options as:
“A type of option in which the payoff is structured to be either a fixed amount of compensation if the option expires in the money, or nothing at all if the option expires out of the money. The success of a binary option is thus based on a yes/no proposition…”
Trading options therefore offers you the unique opportunity to earn instant gains depending on the type of asset and the flavor of binary option trading you use. With Banc De Binary, you simply need to correctly determine the price movement that a certain asset or market will take during a particular time period to earn a profit. However, if your prediction is wrong, you can still receive up to 10% of your original investment back as a return.
Types of Binary Options
In its simplest form, binary options trading is a pure “Call/Put” wager, also known as a “High/Low” trade. However, there are other binary options flavors as well, such as the so-called “Touch / No Touch” options which can be used by more advanced traders to take advantage of typical ranging and trending behaviors of the market prices of the various assets traded. In these advanced modes of binary trading, the trader gains a competitive edge by reading and analyzing indicators and charts before making a trading decision.
- What Is A Put Binary Option?
A Put binary option is placed whenever you expect that the price of the asset or commodity you choose to wager on will be lower by the end of a particular trading period. If this happens, and the asset price does move lower, you win the trade and receive a predefined payout as a profit.
- What Is A Call Binary Option?
If you choose to place a Call option, it is in the hope that when the trading period comes to a close, the price of the asset you will have chosen, will have risen higher than its starting price. If the price rises, you then earn a profit that is predetermined at the beginning of the trading period. In effect, this makes the Call option the opposite of the Put option.
- Example of a Call / Put Trade
In this simple example of a High / Low trade or a Call/Put trade, the amount you could potentially earn by making a correct prediction on the price of oil rising within one hour is 85% of your investment. If you place $100 on your position (a Call option) and the price does rise according to your prediction, you would then win $85 in addition to getting your initial $100 back (total $185). If you lose, and the option has a 10% out of the money refund, you receive $10 but lose your initial investment.
The “Touch / No-Touch” binary options that have been mentioned above all follow a similar theme and all are structured so you can never lose more money than originally invested. This means that you do not have to worry about the financial implications of leverage or to use the complicated risk management strategies that are common among stock and forex traders. The rules of the game are straightforward, which is the major reason why binary options are so popular among both novice and professional traders worldwide.
Types of Assets That Can Be Traded With Binary Options
There are several different types of assets that are tradable with binary options. In this section, we look at some of these types so that you may better understand the different types of assets you will come across when trading options.
One of the most popular binary options among traders has indices as their underlying asset. Throughout the world, there are many stock exchanges, and an index is an average measure of whether the prices of major stocks in a particular market are generally rising or falling. Binary options trades can then be placed which predict whether a particular market index will rise or fall over a set time period.
What Indices Can Be Traded?
At Band De Binary, you can place a Call or Put trade on all major stock indices in the world. Because there are so many, you can always find one that you like or have experience trading. Some of the most commonly traded options in this class involve the DAX, CAC40, FTSE 100, Hang Seng, Dow Jones and NASDAQ.
Benefits of Trading In Indices
The key point that attracts many binary option traders to indices is the fact that they are under no obligation to purchase the shares and stock in any of the companies listed and do not have to deal with stockbrokers. This feature saves you from having to pay the huge fees and hefty commissions that stockbrokers command!
Currencies and Forex
As more and more people get into binary option trading online, many of them choose to buy options that pit the values of two currencies against each other. There are two major reasons that you may opt to buy a binary option based on currencies:
- A currency-based binary option could form part of your daily trading strategy, or;
- You may want to hedge against currency fluctuations that may affect the value of purchases you have made in a foreign currency.
What Currency Pairs Are Available?
Generally, there are no limits placed on you with regard to what two currencies you may pair. You will find pairs of all major world currencies including the US Dollar, Japanese Yen, UK Pounds Sterling, Canadian and Australian Dollars, among many others. Banc De Binary also offers trading in a wide range of minor and exotic currencies.
Can I Pair Currencies and Bitcoins?
Bitcoin is known as a ‘non-fiat’ currency – it is a virtual currency and is not regulated by any government or central bank. The fact that the currency can be traded internationally under the same rules for everyone without being controlled by any government has made Bitcoins extremely popular. Currently, you may only be able to pair Bitcoins with the US dollar when trading binary options.
Commodity Binary Options
Another type of binary options is that which is based on physical commodities. This is because they allow traders to speculate and profit from changes in the value of fixed commodities without having to actually purchase the assets.
What Are Commodity Binary Options?
When you trade commodity binary options, you are simply making a prediction on the price movement of a particular fixed commodity such as oil, coffee, gold or silver, over a preset period of time. Because buying a unit of most of these commodities can be expensive and may result in other costs such as storage and security, this is an ideal way to profit without actually owning the commodity.
What Commodities Could I Trade?
Although there are many commodities traded as the underlying assets of binary options contracts, the most commonly traded are crude oil, gold, copper and silver. The popularity of commodity options in binary trading is down to the ability of traders to profit from the value of these commodities without having to trade in them directly.
Trading in stocks and shares has been a favorite pastime and a lucrative business for financial traders for many years. However, this popularity results in it being highly influenced by public sentiment and opinion, often resulting in wildly fluctuating prices. This could make trading in stocks very risky for traders who are not skilled in analyzing the markets and this type of trading is only recommended once you have gained more experience. Still, trading in stock options offers the same advantage as the other types of options above, with the trader able to profit without actually owning any shares in the companies they trade in.
Banc De Binary offers a wide range of global stocks to trade in. These include common names such as Google, Facebook, Nike and many more. No matter what your preferences are, Banc De Binary has an asset for you.
Tips for Successful Binary Options Trading
Binary trading continues to attract large numbers of traders due to the fact that there is an element of skill involved when it comes to selecting the assets to trade, the timelines to use, how much to invest and the direction of the prediction. If you are a keen follower of all the major financial and political news and always have your finger firmly placed on the pulse of the business world, you may be well suited to online binary options trading.
However, if you are a new trader who is looking to learn the ropes of trading options while improving your chances of earning profits from binary options trades, you need to take a patient and methodical approach. You need to stay level-headed and formulate a workable trading strategy. Although there is no big secret to consistent profit-making in the binary options field, you will definitely make plenty of profitable trades by following a few simple guidelines.
Diversify Your Trades
Because so many people are looking to become binary options traders, there has also been an increase in the number of binary options brokers available online. This often leaves you in a position where you have to make the tough choice between one broker and the other. One of the things you have to look at when making this choice is if the broker gives you the opportunity to enter into a large number of assorted trades.
You should avoid online binary option brokers who only let you access a certain group of pre-determined trades and do not offer you the choice to customize your trades according to your needs. Having a small number of possible trades available to you, places a limit on the potentially profitable opportunities you have access to.
Take Advantage of Bonuses
When you first start trading in binary options, one of the simplest ways you could use to lock in your profits is to take advantage of a range of sign up bonuses that are offered to new players in order to encourage them to trade and gain trading experience. The sign up bonus offered when you register, can be used as a hedge against your real money trades in order to ensure that you make a profit the very first time you trade.
Taking advantage of sign up bonuses is something that you should do when you register to trade for the first time. It is then a simple matter of placing both a Call and Put on either side of the trade to guarantee that you earn a profit. Remember, you are only going to be allowed to claim your welcome bonus once, so you may as well take full advantage of any bonus cash offers you receive!
Forex Trading Profits
Online Forex trading is one area of binary options that is extremely volatile but has the potential to make savvy traders a lot of money if they get in early. During the course of a day, there are plenty of events and factors that could dramatically affect the value of a currency. If you have access to the latest news and can react quickly to it, then it is possible to lock in plenty of winning Forex binary trades. Often, financial news, economic reports, political upheaval and other factors, such as extreme weather, geopolitical events and more, have a dramatic effect on currency values.
Early Exit Trades
As you will find when you start trading binaries, you may be offered an early exit option on certain trades that you make. While this is a useful feature, it is also a bit of a gamble; your trade may be making a profit but still has some time to run before it matures. At this point, you may opt to take up the option to exit the trade early – you still earn a profit, but it is not the full amount you could earn on maturity of the trade.
However, if you have made reasonably high early gains in a volatile market, it may sometimes make sense to guarantee your profits by using the early exit option because in an uncertain market, anything can (and quite often will!) happen.
Avoid Tips and Gossip
As you seek more information to help you become better at trading binary options, you will find many different websites and forums that offer trading gossip and claims of ‘surefire’ tips that are guaranteed to make you successful. In binary option trading, all you can do is carry out in-depth analysis of the assets and make an informed choice to improve your odds of success, but it is impossible to guarantee that any strategy will work.
Attributes Of a Successful Binary Options Trader
A successful binary option trader – similarly to any other investor in the Forex or stock markets, needs to have three main attributes to succeed:
- Control over their emotions
Knowledge and Experience
The first two attributes of the successful binary options trader are easy to address. Knowledge of the binary options trade is easy to obtain because there is now plenty of information available online in the form of guides and tutorials which new traders can use to gain the required knowledge and experience. With the high level of competition in the industry, every broker is trying hard to offer the best learning experience possible to new traders by offering analyses, market data, daily market reviews, webinars and event calendars.
Experience also plays a major part in a trader’s continued success as a binary options trader. Seasoned veterans in the business have – over time – developed trading regimens and strategies that they swear by. What you must understand as a new trader is that binary options is not a form of online gaming or gambling; it is a serious form of trading where you must use analytical skills to not only earn money, but to avoid losing your investment as
Controlling Your Emotions – The X-Factor
While all the factors are very important, the vast majority of new traders fail because they lack the last attribute – emotional control. This is clear to see when a trader finds it easy to enter a particular position in the market but faces indecision when the time comes to close the position, regardless of whether it is winning or losing. While the goal of binary options trading is to maximize winning positions and to minimize losing ones, a lack of emotional control means that many beginners often do things the other way round.
In its most basic form, the binary options trade removes the factor of emotion from trading since every trade has a fixed end point, removing that decision from the trader’s hands. However, there are some traders who demand more flexibility and choose to use ‘double-down’ or ‘rollover’ features. These allow a trader to increase their investment or extend the time to maturity when they are in a winning position. However, use of these features requires that some action is taken on your part. The additional time you get on an existing trade while using the rollover feature, gives you more time to think about the decisions and might make it harder for you to be affected by your emotions.
One thing any experienced trader will tell you is that you should never risk any more than you can afford to lose.
Where Can I Learn To Trade Binary Options?
The Banc De Binary Trading School
The most successful binary options traders are those who are informed and they are, in turn, the happiest customers. For this reason, Banc De Binary has ensured that the education of our clients is our top priority. New traders will be pleased to know that we have made considerable investments in the best and most comprehensive educational resources to ensure that trading information is easily accessible to all.
In addition, we always seek to provide financial research, investment information and daily analysis of the stock, forex and commodities markets. This is so that you can use your experience and financial goals to formulate a trading and money management plan to suit your needs. The Banc De Binary Education Center is a section of our website which contains an introduction to trading, step-by-step training videos where our financial experts help you understand the various aspects of the trade, a resource library and a comprehensive e-book.
At Banc De Binary, we want you to get the best possible start when you choose to trade in binary options, so we provide a free step-by-step platform walk-through to our clients, covering our five platforms and providing a detailed look at how you can trade profitably in stocks, currencies, indices and commodities.
Binary Options Explained
So what are binary options? As you’ll see on our trading platform, what sets them apart from traditional investments is the simplicity of executing a trade. Investors determine whether the value of an asset, such as gold, oil, the Euro versus the U.S. Dollar, or Facebook stock, will go up or down in a set period of time. This simplicity affords traders total control over their trading decisions. If you predict the asset’s direction correctly, you win a predetermined percentage of the amount you chose to invest, typically around 70 – 80%. If you are wrong in your prediction, you lose the investment amount. There are two options, up or down, and two possible outcomes, win or lose; hence the name ‘binary’ trading.
The boom in binary options trading has been driven by investors who appreciate knowing in advance exactly what they stand to lose or gain on each trade. Unlike the stock market, the precise value and percentage movement of an asset is not important. Unlike Forex trading, you can never lose more than the initial investment amount. Binary options allow the 21st century investor to focus solely on what is important, the direction of the asset, without other complicating factors, and to enjoy exceptionally high returns for each correct trade. Simplicity really does pay!
Open a Banc De Binary Account Today!
The Banc De Binary trading platform was developed to give both individuals and financial institutions the opportunity to participate in the exciting new field of binary options by partnering with a global leader. Operating in more than 80 countries worldwide, and with a customer base of more than 20,000, we provide consumers, corporations and institutions with a wide selection of financial services.
If you are looking for a reliable binary options broker, or if you would like to benefit from our signals and trading lessons, get in touch with our experts who will help you build a foundation for trading success! Step into the trading arena with Banc De Binary today.