Why Binary Options’ Trading Becomes More Popular

Binary options trading is a type of options trading that offers new and exciting opportunities for traders, thanks to which any trader can quickly capitalize serious money on the market. Binary option is named so because the trader has only two possible outcomes: either upon completion of his binary option expires “in the money” and the trader will receive a profit or the binary option expires “out of the money” and the trader will lose all of his investment or part of it. The likely return on investment is fixed at the moment of opening of the position.

Binary options’ trading differs from most other forms of trading in that you actually do not acquire any rights of ownership in the asset. Instead, you invest some money in a forecast that the price of an asset will move in a certain way.

The accuracy of your forecast will be determined whether the option expires in the money or out of the money.

The history of binary options

Binary options appeared on the market recently, but initially it was considered “exotic” instruments in an illiquid market.

In 2008, when the U.S. Securities and Exchange Commission approved the listing of binary options in the US, everything changed. From this point, in May 2008, the binary options’ trading appeared on the American stock exchange, and after a month it appeared on the Chicago Board Options Exchange too. Since then, many organizations have entered the sector to provide brokerage services for binary options’ trading and a certain number of trading platforms is currently available on the market.

This opening up of the market means that binary options became more accessible and trading in these instruments has become a much more simple process. As a result, many people began to trade this instrument, and binary options have become much more popular. This dynamic shows no signs of slowing, which suggests that an increasing number of traders are beginning to realize the advantages of binary options trading.

How to trade binary options

Binary trading is truly easy. Once you have chosen a binary option broker, registered and deposited some funds, the entire trading process involves a few steps. First, you will need to select an asset from those available; it may be individual stocks, indices, currency pairs and commodities. Each of them will show the current rate of the asset price, time to expiration and the payout if you prediction was correct.

Then you make your forecast by choosing a call option if you think the asset price at expiry will be higher or a put option if you expect the price will fall. Enter the investment amount, which will be fixed after your confirmation of the position. This will allow you to determine the payout you receive if your prediction is correct.

Upon expiration time in case of a correct prediction you will receive the amount of your original investment plus the fixed payment in percent. If your prediction is wrong, you either get nothing, or get a small percentage of the investment. It depends on the individual policies of the broker.

Assets that you can trade

Because trading binary options is to predict the direction of price movement, it is theoretically possible to trade at any change of the prices listed on an official exchange. In fact, you can trade on certain types of assets only. You can trade in the shares of certain companies, which are traded on the stock market or the indices of the complete market, such as NASDAQ, FTSE, etc. You can also trade any commodity, e.g., gold or oil, or on a currency pair e.g. EUR/USD, which is quoted on the foreign exchange market.

These assets are known as underlying assets because you never owned them as actual asset, just predicting how they’re going to change his price. Trading platforms trade the actual assets that are available for trading.

Trade on currency pairs is especially attractive to Forex traders who have some knowledge about the market. Since there are a large number of combinations of currency pairs and they are constantly changing in different directions, there are huge opportunities for earning of money.

The Forex market represents the largest financial trading market in the world with the greatest liquidity. You can trade with zero commission and no spread that will contribute to increased profits for successful trading.

What you need to do in order to trade binary options successfully

If you are going to successfully trade binary options, you need to study the asset you want to trade. For example, despite what you may have fairly good knowledge regarding the Forex market, you will be able to place your positions better, if they have information about the specific currency pairs you want to trade. It is also important that you should have newest information and that you should not rely on outdated data. To improve your chances of success you can use two types of analysis:

1. Technical analysis

Technical analysis assumes that the assets are always evaluated correctly and that the price already includes the impact of a particular event. Consequently prices will always move in a consistent manner, and you can predict the price movement in the future based on the valuable movements in the past.

One of the main tools of technical analysis is a price chart which is constantly updated, showing the latest prices of an asset. Each chart may show recognizable patterns that will indicate whether the price keep on its current trend or it will make a turn. The identification of these patterns and their correct interpretation will allow you to predict the probable movement of the price.

2. Fundamental analysis

Fundamental analysis is based on the principle that assets are generally measured incorrectly and that markets are constantly trying to fix them. These amendments are based on current events, and therefore you will need to constantly check news, announcements and various publications.

This type of analysis can be subjective, because you form a view based on events that you see. Nevertheless, you should view all levels of news data, depending on the asset you are trading: from the level of the company, industry and market levels and to levels of country-wide and global level. Many events are interrelated and can affect the price of different assets and even different classes of asset.

Each type of analysis will help you to be more successful in their forecasts. However, usage of combination of technical and fundamental analysis will improve your chances of success.

What you should look for when choosing a best binary options broker

The growing popularity of binary options trading attracted a number of brokers to the market. They will all have some common features, but will have certain points that distinguish them from all others. In order to be able to trade, you need a broker, it is important to choose such a broker who would provide the necessary type and level of service you need. When choosing a binary options broker, pay attention to the specific features that each of them offers and compare these brokers with each other.

Trading platform is your access to the markets, and it is important that the platform had a full set of features, so you were not limited in your choice. Similarly, it should be simple to use, so that you can focus on trading, instead of working to achieve specific goals. Company’s website and the procedure of registration are usually a good pointer because, if they are easy to use, it is quite likely that the trading platform will be easy to use also.

Most binary options platforms are using Internet so that you can access your account via the browser. Ideally a mobile version of the binary options platform will be available that can give you the opportunity to trade with the help of your smartphone or any similar device in any place and at any time.

Some binary brokers may offer only a limited range of tradable assets in a relatively small number of markets; this may severely restrict the opportunities for trading and earning money. What you really need is a broker that offered a variety of asset classes, covering the maximum possible number of global markets. This means that you, as a rule, must have access at least to one open market for trading and you should have more chances to select an asset to trade, instead of having to settle for something simple just because it’s your only choice.

Safety is crucial because you will provide your broker with your personal information, and he will also keep your money for your trading. You must be sure that the broker offers a secure trading environment. The broker must have Privacy Policy that protects your private information from disclosure to any third party and he must provide proper level of identification, which prevents unauthorized access to your account. It is also important that all your data and transferred information should be securely encrypted, so others could not access it.

You need to deposit money into account to finance your trading, and over time you’ll want to withdraw the accumulated profit. Make sure that the broker will perform it is simple, fast and inexpensive; that it will not interfere your trade unnecessarily and will not make you long to expect to get your money. Choose a broker that offers several methods of deposit and withdraw, and that this process is not too complicated.

Some brokers offer bonuses. It can be bonuses that will be given when you register for the first time, so you can make more trades and make fast start, or they can be given in addition to any of your Deposit. You can also get bonuses and enjoy the benefits of a particular financial event or get bonus discounts, depending on the amount of your trade positions for a certain period of time. Regardless of the reason for their accrual bonuses provide additional funds and offer further trading opportunities.

However, if you are the experienced trader, then you will probably want to have a certain degree of support at some time. If you are the beginner, you want to be provided with information about binary options and how to trade it and with easily available guaranteed support and guidance. Being an experienced trader, you will have to get the latest information, prices, analysis and reviews.

Brokers offer different levels of service that are designed to meet the needs of different types of traders depending on the selected account type. Make sure that you are provided with a hotline, email address and live chat, if you’d had an accident. Look at the type and amount of provided information, and how often it is updated. Most importantly, make sure that you are provided with accurate and high quality information.

Some brokers offer different accounts with varying features aimed at traders of different levels: from the beginner to the experienced professional. You can start trading on a demo account without risking your money (and not making deposit). However, some brokers require you to make deposit even for trading on a demo account.

After that you can trade in the principal account (even if the sum of your deposit is not big) to the extent that you will use the upper limit of the range of your account, which would require much larger funds on your account, but would provide more personalized and comprehensive service. Check the availability of your deposit and make sure that it is the deposit that meets your needs now and in the future.

Most importantly, note the number of brokers, compare what they offer and choose the one who is best for you.

Binary trading strategies that you can use

Binary options’ trading is a simple process; each transaction is a separate contract, however, by combining the capabilities and tracking multiple assets you can increase your efficiency index. There are different binary options strategies you can apply in different situations.

You can apply a trading strategy “at the turn” when the price chart shows that the trend is going to reverse. In this case, you will predict a price change in the opposite direction to the previous one.

The binary options strategy “Straddle” involves purchasing both Put and Call options on the same asset at various price levels. Both your options expire “in the money” if at the time of expiration the price will be between these levels. Otherwise, you will have at least one option that expires “in the money” successfully and thus you’ll minimize your losses.

The binary options system of chain reaction is applied when the change in price of one asset affects the price of another. This may occur, for example, when the rising price of goods contributes to the decline in the company’s profits and share price of the company drops accordingly. Buying of Call option on this product and Put option on the shares of this company will lead to the closure of both of your options “in the money”.

You can use other strategies, for example, forex fundamental analysis, and, if used correctly, it will increase your profits or minimize your losses.

Why binary options’ trading becomes more popular

The growing popularity of binary options involves a number of factors. One of the main is the fact that traders who trade binary options can be successful in all market conditions.

You do not need to have a growing market to make money in binary options trading. If you predicted that the price will move in one direction, no matter how long it will take a bullish or bearish market (depending on your correct prediction). Indeed, the market volatility often increases the opportunity to make money. Trading in the foreign exchange market means that you can get an option “in the money” if you have predicted falling or rising in value of one currency against another. Constant changes in the rates and number of available combinations gives you almost limitless possibilities for large profits.

All markets follow trends and you can make money on rising trend by buying Call options, but also on falling trend, buying Put options. The whole point is to predict the direction of market movement. Volatility brings uncertainty but it can also provide you the opportunity to earn money when trading binary options. The key is to be ready for what is going on, to follow the signals, and then get profit if your prediction is correct.

Another important factor is the availability: as this is an outdoor market, an increasing number of brokers offer binary options on their trading platforms as a tool for trading so you can trade it on your PC.

The main advantage of binary options trading is its simplicity, since each deal consists of simple steps. You choose the asset you want to trade, make your prediction on whether its price will rise or fall of within a certain period of time, and then enter the amount you wish to invest. After that you’re just waiting for the expiration of the option, to see that your prediction was correct.

First of all, trading binary options provides low risk because you can invest small amount of money in every position, the size of which you specify in the beginning. Typically, the minimum is $5. The maximum investment amount is $2 500 per option, although it can be increased for some types of accounts. So you know the maximum amount you can lose, and can limit the amount you can afford to lose.

Despite low risk, you usually can quickly get high profits. The validity of binary options typically expire in a few hours or even a few minutes, and in case of correct prediction you get returns in 70 - 81% on your investment. This means that after completion of several successful deals you can have high returns in a short period of time.

The future of binary options

Binary options’ trading has come a long way in a relatively short period of time. Since a growing number of binary options brokers enter the market and traders understand the available opportunities, it is likely that binary options will continue to become more and more popular. Trading will become more flexible and the increasing number of mobile platforms will allow you to trade anywhere and at any time. The range of tradable assets will grow, there are even binary options on the index of rainfall nowadays. Regardless of future circumstances, it is unlikely that we can predict anything else for binary options but a further increase interest in them.

Take care,

Michael