How to trade binary options
Before starting to describe the rocess of binary options trading, let’s define, at first, a term “binary options”. It is a kind of financial contract having fixed profit and giving an opportunity to profit thanks to price movement of basic assets.
Let’s list peculiarities of binary options. Below we list the main of them.
Main peculiarity of the instrument is concluded in the fact that trader knows how much he can lose or earn with any option before transaction conclusion.
Traders buy contract, but not an asset itself, that let more number of traders who otherwise would not be able to overcome high prices obstacle get profit from predicted price movement. For example, instead of purchasing of twenty 1000 dollars' stocks, alternatively a person can spend twenty dollars on two binary call- options purchasing.
This index can multiply exceed earning power of comparable fundsallocation in direct assets purchasing because profitability does not depend on final price difference, and is more likely connected with price movement changes towards the asset.
Since the amount of binary options payments mainly depends on asset price change direction and has little connection with price difference, that’s why it is not necessary to have much detailed information about the asset to get profit. It makes the process accessible for less experienced traders.
What means trading with this instrument? To trade with this instrument is to have an ability to predict the asset price's changes. A person usually make suggestion about probability of the price in(de)crease in comparison with the opening price. If the opening price is lower than the closing price, a buy position will provide him profit. If the opening price is higher than the closing price, a sell position will grant him profit. Otherwise, his transaction will bring him a loss.
What steps should be made to trade this kind of instrument?
At first, one need to choose amount of deposit pressing the button “Amount” on the panel placed on the right side. After doing that a future trader are necessary to choose the time of option being valid. It can be done with the button “Time”.
When the time runs out the option will become invalid and not available to be used. This time may be found on the chart. It is indicated by the red solid line. The time of purchase performance is indicated on the chart by the white dashed line. Until this time, a person has an opportunity to purchase a great deal of same asset options in the direction chosen before.
Next it is necessary to make choice of the direction of price changes. If one think price will skyrocket, it is necessary to choose the green button “Higher”. Otherwise – it is necessary to choose the button “Lower”.
After the transaction crosses the red line and after it becomes invalid, result will appear: if prediction happens to be true, the green window with end profit will appear, if prediction happens to be false, the red window with the amount of loss will appear.
In this kind of trading a level of price changes is not so important. In case opening and closing prices are equal, one will return back the sum of first deposit into the transaction to the account.