Definition of Binary Options

On the other hand, when you trade binary options, all you need to do is predict the direction of the price’s movement. This makes the task much easier and the best part is that the amplitude of change doesn’t matter, so the risk you take is reduced to some extent.

Although many people say that Forex trading and binary options trading are very much alike, you should know that there are major differences between them and this article will cover some of them.

First of all, binary options are transparent – you get detailed information about your eventual profits and losses, so you can easily make up your mind and decide whether it is worth placing a trade or not.

The opportunity to see the amount of money you’ll make from the trade is very attractive and many people prefer binary options trading exactly for of this reason. When you choose a binary options broker, you’ll see what profit percentage the broker offers. Depending on the type of binary options you’ll trade, the percentage will vary between 60-80%, but in some cases it may go up to 600%. However, this only applies to certain types of binary options.

Time is an important factor

One of the advantages of binary option trading is that your deals aren’t open-ended – every trader has to carefully calculate their predictions in order to choose the expiry time of their position. In order for a trade to expire in the money, the trader has to predict in which way the price will go at a specific time. This may seem as a difficult job, but as soon as you get to know binary options better and get familiar with fundamental and technical analysis, you’ll see that this isn’t as difficult as you think.

Bear in mind that binary options are very flexible, so the trader can choose the expiry time of their deal. The number of choices you get depends on the broker you’ve chosen, because some brokers offer the so-called 60-second binary options, which are a great way to quickly open and close trades. If you are using regular Call/Put binary options, you are most likely to have the opportunity of making a choice between minutes, hours and even days.

When you trade binary options, you’ll have access to all the assets that are available on the regular trading markets – stocks, indices, commodities and currencies. Naturally, the number of assets you have access to may be slightly limited by your broker, but such cases are pretty rare and we are sure that as soon as you read our post about choosing the best binary broker, you’ll choose the one that meets your demands and needs.

Final Words

In conclusion, binary options are a great way of earning extra income, especially if you are dedicated to this task. Of course, don’t forget that this type of trading is everything but easy. In order to become a successful binary options trader, you’ll have to read enough literature, study different strategies, spend a lot of time trading with a demo account and hopefully, in several months you’ll be ready to start investing real money and generating sufficient income.

If you are not an experienced trader, we recommend you to pay special attention to the ‘Fundamental Analysis’ and ‘Technical Analysis’ chapters of our tutorial, because these are two of the key studies that every binary options trader must master. In addition, you must also acquaint yourself with the all-important “Risk Management” and “Psychology of Trading”, as well as some of the hundreds of binary options trading strategies you can use.