Binary options are based entirely upon a “yes” or “no” answer to a question. That question typically comes in the form of whether a specific asset will be valued above a specific price at a specific time. Put in those words, binary options seem quite simple. And, because of their simplicity, binary options have become incredibly popular.
However, you should be sure to do a fair amount of research on binary options so you better understand what you are getting yourself into.
Today we are going to share with you a quick binary options guide that will provide you with tips on how to start trading binary options.
1. The Question
Binary options always start with a question. For example: Will the price of oil be above $54.00 at 9:30 a.m. today?
2. Your Answer
Do you think that yes, the price of oil will be above $54 at 9:30 a.m. today? If so, then you will buy the binary option. If you think no, the price of oil will not be above $54 at 9:30 a.m. today, then you will sell the binary option.
3. The Price
Binary options will always cost between $0 and $100. The offer price will be what you pay to buy the binary option at, the bid price will be what you pay to sell the binary option at. The bid and offer prices will go up and down from when the option starts to when the option expires. When the option expires, what you are left with is either a profit or a loss, depending upon whether your answer to the question was correct or not.
4. Where to Trade
You can trade binary options on the Nadex exchange which has its own platform specifically made for binary trading. You can also trade binary options via the Chicago Board Options Exchange.
5. $100 Maximum
One of the positives and negatives about binary trading is that the most a binary trading option can ever be worth is $100. This is positive because it means your losses are less than they may be with other forms of trading. However, this is also negative because it means your gains aren’t as much as they may be with other forms of trading. The trick here is to purchase multiple binary trading options contracts to increase your potential profit.
If you are feeling a bit unsure about binary options trading, consider using a demo account with one of the binary options brokers we have listed to get a bit more of a feel for this form of trading. Once you feel that you have gotten your footing there, give the real binary trading a shot. Remember, you can keep your losses low if you want to, so this form of trading is only as risky as you choose to make it.