If entering the stock exchange market is what you are interested in, then binary options will be your best bet. As the name suggests, there are just two possible outcomes in binary options. There’s the profitable scenario (you finish in the money) or the zero return scenario (you finish out of the money). Because this type of virtual trading is simple to understand and use, there are numerous traders who have profited from binary options trading. It is advised to approach trading with caution at first, in order to get a better idea how to use these options.
It is also necessary to have a good understanding about the market before getting started. Below is a description of three types of options that are available in binary options trading:
- Touch option
Touch option, also known as one touch option, is a type of option in which the trader has to predict whether the value of an underlying asset will reach or surpass a previously set limit before the expiry time. If the prediction is correct, the trader earns the stipulated profit. If the set value is not reached and the prediction is not correct, the investment will be lost. One touch trading option should definitely be chosen if you sense a growth in the price of a certain asset. Even though touch options are available for currencies, stock, commodities and indices, they produce best results with currency and commodity trading.
- Above/Below option
The above/below option is also known as the high/low option and is probably the easiest option available in the online financial market. The trader has to choose whether the price of their selected asset will increase or decrease during a set period. Most times, the expiration time arrives in hours or even minutes. The best thing about the above/below option is that the expiration time is selected by the trader. This simple to use option is highly risky, but all the more profitable. The high/low options are currently the most popular options available in the market today.
- Range option
The range option presents a previously set lower and higher limit. After buying this option, the trader has to decide the movement or the volatility of the asset with respect of the previously set boundary. In other words, the trader has to speculate whether the asset will finish in the preset price range or out of that range at the time of the expiry of the option.
If a trader thinks that their chosen market (be it commodity, currency or stock) is very volatile, and the value of the asset will cross the predetermined boundary, then the trader should choose the ‘out of the range’ option. If the trader believes the market to be too complacent at the moment, they can go for the ‘in the range’ option. For you to succeed and earn the profit, it’s important to have good prediction skills as well as knowledge about the latest business news.
Keeping constant track of the latest news of the financial world helps in guessing the volatility of any market. Knowing the basics of economy is important as well. If a trader does not have the right knowledge, trading binary options will become a gamble. They could make a lot of money one day, but lose a lot another day.
All the above mentioned options have different benefits. The best feature that is common to all of these types, is that you can get the outcome of the trade in a short period of time. If you are a smart trader, you could get good returns on your principal in a short amount of time.