Binary options trading is relatively new, it only started a few years ago (2007-2008), but it’s still growing in popularity. This type of trading was originally targeted for those investors who were not interested in investing large amounts of money in stocks long term. In binary options, if the contract ends in the favour of the trader, the investor can receive a certain amount as a return on his initial investment.
There are four different types of investments: indices, stock, commodities and currencies. People who are actively trading in traditional options are aware that to be able to invest in conventional options for indices, currencies, and commodities, a trader has to invest a large sum. Trading binary options, however, only requires small initial investments, and the biggest benefit of this type of trading – you don’t have to keep your money tied up for long periods of time.
As the name suggests, binary options have only two possible outcomes. Depending on the direction of the value of a certain asset, a trader can either gain money, or get nothing at all. If the price of your asset drops, you end up “out of the money”, if the price goes high, you end up “in the money.” Of course, there are certain risks involved if you don’t analyse the market before investing money, but compared to traditional options, the risk is much lower. If traders really understand what they are doing, it is possible to minimise the risks and increase their chances of earning profits. If you’re just a beginner in this trade, it is advisable to get started with a small investment and learn the dynamics of the market first.
A lot of people find binary options trading very attractive. The reason behind this has already been mentioned – a trader can get started with a couple of hundred dollars, and earn good profits in a short time. However, it’s very important to approach trading options with caution at first. It’s necessary to study the market as well as gather information about the asset you plan to invest in before you actually put any money in it. For example, if you are going to trade in currencies, you should research the forex (foreign currency) market and get all the information you can get about trading currencies.
Many investors find the short term binary trading a very useful tool to earn money. The duration of these types of trades can be anything from one hour to a couple of days. The hour option is considered to be the best, because the trader will get the idea of whether they are losing or earning money within that time and if they feel their trade is not going in the right direction, they can get out without incurring much losses. This means, your money isn’t held up for a long time and you can get quick results on your trades.
The prices of different categories are influenced by the current world affairs. Therefore, it’s necessary that the trader is aware of what’s happening in the world and has heard the current news, so he could make an informed decision. Hence, to earn profits, a trader has to be able to estimate the effect of world events, including happenings in the financial and political world, and make a decision based on that. If you’re a smart investor and understand the dynamics of the market well, you can definitely make hundreds of dollars each day by investing in binary options of your choice.