10 questions about binary options

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10 QUESTIONS ABOUT BINARY OPTIONS

What is Binary Options?

Binary Options is a betting about how a asset will perform (up or down) in a given time frame. Usually from 60 sec and up to a day. In Binary Options you play/trade on the market movement’s.
Example: The position of the EUR/USD at the time you bet is 1.0907( 1 EUR = 1.0907 USD) You think that the EUR will go stronger, so you bet up (Call). If you think the USD will go stronger then you bet down(Put). After 5 min (We say that was the time you chosen) the position is 1.0908 or higher. If you bet on up you win but if you bet on down then you lose.
Let’s say you bet $25 on up, and the win rate was 75% then you would get back $43,75 that means you won $18,75 if you had lost then you would have lose $25

If however it ends at the same position as when you started then you just get back your money.

What assets can be traded as Binary Options?

The most brokers have a wide variety of binary contracts that their traders can trade with.

  • FOREX Combinations of currencies such as EUR/USD, EUR/CHF, EUR/AUD, EUR/GBP, USD/CHF, USD/JPY and many more.
  • INDICES Here you can trade on how the markets will move such as Nasdaq, Dow Jones, FTSE, Nikkei, S&P 500, DAX and many more.
  • COMMODITIES The most common commodities you can trade on are Gold, Silver, Oil, Sugar, and Coffee. But some brokers have a lot more.
  • STOCKS In stocks you also have a huge variety of companies that can be traded with. Some of the most usual is: Apple, Amazon, Coca Cola, Google, Facebook, BP, Santander, Citygroup, and MorganStanly.
What is a Call Option?

An option is an opportunity for the owner to buy a certain number of shares of an underlying asset at a given price, (strike price) by a given date (expiration date). So where does the Call come in? A Call Option is given that name because of the owner`s right of “calling” the stock away from the seller. He has the “right” not an obligation to buy it. So a Call option predicts that the assets marked value would be higher at the closing time than what it was at the time you started the trade.

What is a Put Option?

Simply: Put Option is the opposite of Call Option

It is an option for the owner to sell a certain number of shares of an underlying asset at a given price, (strike price) by a given date (expiration date). And the Put Option is named so because of the owner`s right to “putting” (sell) the stock to someone else. So a Put option predicts that the assets marked value would be lower at the closing time than what it was at the time you started the trade.

How do I trade FOREX Binary Option?

FOREX stands for “Foreign Exchange” and it shows the strength or weakness between pair of currencies. If you as a trader has Euro and want to sell that to buy Dollar, then this transaction would weaken the Euro and strengthen the Dollar or the opposite if he sells Dollar to buy Euro and if several traders do the same or the one trade is big enough then the rate between Euro and Dollar will change, and it is this change you are trying to predict if go’s up or down. Simply said, your goal as a trader is to predict correctly which direction the change of rate will go in order to make profit.

How do I trade Commodity Binary Option?

The trade for Commodity is mainly the same as for FOREX, the only change is that instead of trading in the value change between pairs as in FOREX, you here trade in the value of one commodity. For instance if you decide to trade in Gold, and you think that the price of gold will rise the next 5 minutes then you buy a “call” trade at the price of $ 1096,285 per ounce, and at the end of your 5 min time frame the price of gold is $ 1096,286 then you will win.

How do I trade Stock Binary Option?

The trading in Stock options is mainly as both FOREX and Commodity trading, it allows us to take benefit of an uptrend (Call option), or a downtrend (Put Option).

An example:

Let’s say that you got information that Apple is going to announce the new iPhone 51 today. If we then take a brief look at the history about what usually happens when Apple make this announcement’s. The typical is that the Apple stock makes a move upwards the first hours after these announcements. How can you so use this information to your benefit in the Binary Option trading? Just after Apple actually have made their announcement you go in to your broker and buy a Call Option of Apple, and if the stock value rises within the time frame you set, then you win and if its goes down …..

Where can I learn how to trade?

If you want to learn and experience how it works a lot of brokers have the ability to open a Demo Account. Here you can perform trades with live data but without investing any money. This is a great way to get the feeling with how it works.

How much do I have to invest?

This is different from broker to broker. Some brokers have set the limit as low as $ 10 others $ 50 and some even $1000. Mostly it is between $ 50 to $ 250.

Can I make money with Binary Options?

The simple answer is YES YOU CAN, BUT!!!!!! There is a big but, you can also lose all the money that you invest. The thumb rule is that you never invest more than 5% of your assets in one trade.

This means that if you have $ 500 in total assets at your account then you can use $ 25 for each trade.

I was inspired to write this blog after reading Saras blog: Can you make money with Binary Options?

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Recent Comments

18

great blog post! ;)
I recently opened a demo account at IQ option and I am learning how binary options works. I have to admit it's quite exciting and interesting and I love understanding all the signals.
I have earned $13,500 on my demo account but don't feel ready yet to get started with real money ^^
Have a great day
Sarah

Thanks Sarah, keep me up to date on how you are doing. Thanks, Chuck

still learning, I'll let you know when I'm trading with real money... anytime soon ^^

Hi Sarah,Is it a risky journey? Could any no experience get there and win? Thanks

It IS risky of course.... As a matter of fact I went from binary options to forex, because I found it a lot safer, being able to set a take profit and stop loss entry... whereas binary options only rely on timing and sometimes the timing is wrong and you will lose your money only by a second... So do not trade real money unless you have had the proper training and enough experience
Good luck =)
Sarah

This is a NO WIN approach. The leverage is minimal, so you as an investor will always loose out in the final analysis. I am saying this as an accountant The only winners are the creator of the website as they can always manipulate the software to determine the trend. It is the simple common sense adage, LET THE BUYER BEWARE.

Hi Elijah,
I have to disagree with you. In Binary Options you do not have leverage like you have in ordinary trading. In BO you predict about the way a currency pair will go, not how much it will move. If the price just move 1 pip in the direction you believed, then you win the same amount as if the price moved 10.000 pips.
All software is possible to manipulate, and in all businesses you always find some rotten apples, but the over whelming part of brokers operate legally and do not manipulate the trade. Those that not play straight will soon be discovered and banned. As a trader you have a huge amount of pages that you can check trends, and big economic happenings. Like my example with Apple launching a new product if a broker not followed the same trend afterwards such an announcement and also all the other daily and hourly trends then they would have been revealed in mater of minutes. What they however can do is take huge payment for withdrawal of money, delay withdrawal and also the worst crooks just take your money and disappear. To avoid things like that you mainly just need to browse a little on the internet and then you quite soon find out how the broker you planed to use behave. And if there is no information or just negative or mostly negative information you just have to choose an other broker.

Al right, you are a free person, and as such entitle to your opinion and freedom in all ways. I wish you the best always.

Same to you Elijah :) And even that I disagreed with you a warm tnx for your opinion :)

I agree. It's not like regular stock options whereby one can get wins of several hundred percent. If you like the casino you'll love binary options.

Thanks Baran. For me, the nice feature of options was to know from the start what risk I was taking, how much, etc. I'm speaking of stock/commodity options, but same principle. Many ways to profit using options, also a good strategy to use as stop loss if one has a very profitable trade going and want to protect their profits and catch the other side of a market.. Good way for one to get their feet wet without risking the farm. :)

Have a great day
Jim

Tnx for the comment Jim. :) Yes the stop loss and also the take profit is very useful options to use :)

The shorter the expiration date or time, the more of a guess is your trade. Nobody can gain an edge in determining if a stock will go up or down in the next 5 minutes. It's solely a pure guess.
A non binary call option on a strong up trending stock has a far greater chance of winning with an option expiring in 3 months than an option expiring in 1 day. Even then it is still an educated guess that the stock will increase in price with 3 months.

Since binary options expire is such a short time they are pretty much a total guess. Binary options can not earn more than something less than 100% while non binary options can earn profits up to 1000%.

Bottom line: If you like the lottery you'll love binary options.

Yes I agree that the shortest trades are more like the lottery, and I will advice to trade with longer time frames than 60 sec. the binary options brokers usually also have the option to choose time frames like : to the end of the day, the end of the week and some also to the end of the month. I trade both at Binary Options and "normal" trades. And you can both win and lose money at both of them.
The bottom line should be for any of them NEVER invest more money than you can afford to lose.

thanks for the reply. Come visit me at https://simpleweeklyoptionstrading.com

It is an interesting way to trade that I will take a closer look at :)

I agree as well. I find it a lot easier to predict a trade in the long term, by looking at the trend... I don't feel like I'm playing the lottery, I'm really thinking and looking at all the signals, reading economy news and looking at the currency trend.
I believe you can make money, it's just not as easy as it sounds ^^

I think the best option to play forex is our local bank they can explain anyone the risk of losing money on trading . Your own bank will explain you if you want to invest for 6 months or longer with details .
Trading online and giving your credit card detail is not safe . It is better to see somebody on person with a place where you can ask for your money back.

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