Forex trading enables normal retail traders to avail great opportunities and earn huge profits by putting their money in certain currencies. And to make it more attractive, binary options allow the investors to limit the risk and get their profit in forex trading in a very short period of time (usually an hour). Let us explore binary forex options in more detail and see how they could be used to maximize profits and minimize the risk factor.
Forex trading gives you an access to global financial market where currencies are traded against each other. Banks and other financial institutions buy and sell currencies to gain profit. Financial centers from around the globe act as liaison between the buyers and sellers who trade all day and night, 5 days a week. Forex becomes all the more important because people and companies to use international currencies while they are importing if they are importing or exporting goods.
Binary forex trading options enable an average person to be part of forex trade by putting a small investment to make some money with the appreciation of certain currencies. In forex, the exchange rates fluctuate according to the market and economic conditions of a country. A trader has to make predictions about the value of currency and then use the call or put options to earn profit.
Trading from the comfort of home via online platform, you are able to buy put or call options on the most well-known currency pairs like Dollar and Euro or Japanese Yen or any other pair that you like. An understanding of simple market dynamics can help you earn profit in short time. Small investments and instant returns make binary forex options trading so attractive and it is the perfect place for newbies to start. All you have to do in this trade is to predict whether a currency will move up or down against the other currency during a specified short time period.
Binary forex options brokers allow you effective binary options trading platforms. You can choose various currency pairs and start your trading. The most commonly used currency pairs are: Australian Dollar (AUD) is to US Dollar (USD), Euro (EUR) is to British Pound (GBP), Euro (EUR) is to Japanese Yen (JPY) etc. You can use certain formulae to calculate the expiration value of certain currencies at the end of an hourly, weekly or monthly option. The formula for calculating the values would be: [(ASK+BID)/2]
If the fifth decimal digit is greater than 5 then the result is rounded up and it is rounded down if the fifth decimal digit is less than 5. If you decide to trade on pair AUD/USD, then you will have to keep certain factors in mind. You know that AUD is following a declining trend against USD (as it fell from 1.6 to 0.9 recently) to finally settle at 0.950 because the Australian Govt. released some poor growth figures. You should take it as a signal that AUD will continue to have declining trend against USD. If you purchase a put option for $500 with one hour expiration and if your prediction is right even by 0.001 below the strike price, you will be entitled to $850 ($350 profit+$500) being your original investment).
The above mentioned scenario is just one example of making short term profits in forex trading. You could earn great profits every day by investing money by using various currency pairs in binary options forex trading.