The concept of binary options trading is very simple – the trader has to speculate whether the price of a specific asset will end up below or above a certain threshold. The correct prediction can earn the trader a good amount of money based on a preset percentage of the original investment. On the other hand, if the prediction is wrong, the original sum will be lost. In many cases, the trader can get back between 15 and 20 percent of their investment.

Trading Binary Options

binary options trading faq

Like in all financial transactions, there are some risks involved in binary trading too, but this trading type is still gaining in popularity. There is a large variety of assets available, ranging from indices to stocks and commodities to currencies. Even though trading binary options has become very popular in the recent years, people still have confusions and questions about how this works. Below are a few of the most common questions which we will try to answer as best as we can.

  1. Does the trader have ownership in the business if he invests in binary options stocks?

Many people assume that if they trade a company’s asset, they can claim some sort of ownership in the business. This is not the case in binary options, as there’s a difference between shares and binary options. Binary options do not give the trader any right to ownership. This type of trading simply lets the trader predict the movement of a specific asset’s value. Once the contract is finished, all ties with the company are severed too.

  1. How Does Binary Trading Work?

Let’s have a look at a simple example to better understand binary options. Let’s say you think that the price of gold will increase in the next hour and you decide to purchase a binary option worth $800 on gold. The broker you have chosen to work with will ensure that you will get a 76 percentage payout on the trade. If you predict the price right, you will be paid $1408. This includes the amount you invested in trade plus the profit of $608 you’re entitled to because your prediction was correct. However, if you guessed wrong, you will lose the amount you invested. No further claims can be made, unless your broker offers some sort of a refund.

  1. Where to Trade Binary Options?

The best way to trade binary options is via internet. Doing that will let you browse tens and tens of profiles of different platforms and brokers, and that will help you in making an informed decision. Figure out what exactly you want and then make your choice. Some platforms offer information on strategies, while others are more user-friendly. There are also E-books, videos and blogs available to help you make the best choice. Look for a broker that offers a variety of currencies, stocks, indices, etc.

There are many things to take into account if you’re looking for the best trading mechanism. Before investing any money though, make sure you find answers to your questions first. Trading binary options is a less risky venture for investment, but low risk doesn’t necessarily mean no risk. Choose the most reliable broker and be persistent when trading in options so you could maximize your profits. Good luck!

Gary Beal