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What are Binary Options
There have been many articles written about binary options, but almost everywhere we see information of a technical nature. In this article we will try to explain in simple words what binary options are.
In general, it's like betting on a soccer game. I bet on Italy to win, you bet on Italy to lose. If Italy wins, you pay me money; if it loses, I pay you.
Only instead of the soccer team, the options include currencies, stocks, futures, forwards, oil, gold, and many other exchange-traded instruments.
Let's analyze by example. Let's say gold is $100 right now. I think that in an hour it will be worth more than that. It doesn't matter how much higher. I tell my broker (the company that executes my trade orders): "I bet $100 that gold will go up.
The broker finds someone who thinks that gold, on the contrary, will go down in an hour. He bets a hundred dollars on it, too. We make a "bet." We each bet a hundred dollars. We sit and wait.
An hour passes. The broker looks at the price chart. The gold is worth $101. $1 more than it was. I win.
The person who argued with me gives the broker a hundred dollars. The broker keeps part of that amount (twenty dollars) and gives the rest to me. Why did the broker take 20% of my "winnings"? Because he had to find someone who made the same bet as me, to keep track of the gold price, to take the money from the loser's account. All of these services are not free.
The result: my opponent lost $100, I earned $80, and the broker made $20.
How are options trades different from regular trading? Trading is when you buy a financial instrument (the euro, for example), wait for it to rise in value, sell it, and take for yourself the difference. The greater the difference in the buying rate and the selling rate, the greater your profit.
Binary options are a "bet" with another trader. You make some prediction, bet a certain amount of money in advance and set a certain time when you have to check the result. When the time comes out, you see whether your prediction works or not. If it is, you get a fixed amount of money, if not, you lose your bet.
In binary options trading you know in advance:
· The amount of profit, if your forecast is justified.
· The amount of loss, if your forecast is not justified.
· The time in which the results are "summed up": a second, a minute, an hour, a day...
Binary options broker
A broker for binary options is a company intermediary between a trader and the market, which provides a trading platform through which broker's clients can execute trades. To put it simply, it is a virtual trading platform where you make the trade. Therefore, the choice of a broker to trade on the trading platform
you need to be very careful when choosing a broker. Because in this sphere, as everywhere else, there can be scammers who falsify quotes, do not withdraw profit, etc. The regulators fine brokers from time to time, but it does not help much (because the turnover of such brokers-fraudsters is not serious).
Now more and more gaining popularity Binary options in online mode. What is it?
Binary options online - it is convenient, relatively simple and very fast way to make good money. This trading system does not require any additional software installation and thus can be used on absolutely any computers, even on severely outdated ones. How to trade binary options online?
In order to trade binary options online, you will have to learn how to do it. If you already know everything, or so you think, you can skip this point. In general, special training is not required. It is enough to study the trading platform and its interface, look through all the available functions and practice on a demo account.
We also strongly recommend you to study the "Training" section. It contains at least two subsections worthy of attention: FAQ and Strategy. In the first one, the answers to all the most popular questions are given. It is recommended to study in the first place. This will allow you to avoid many problems and in the end, you just begin to understand better what you can or cannot do on the platform.
The second subsection is devoted to current trading strategies. Here you can (and should) look through all available options, and then select a few that are most suitable for you. Further it is necessary to test these strategies on a demo account and to stop on any one. This is for beginners. Experienced specialists can work the way they want.
Types of binaryoptions
They come in a lot of different types. Let's look at the six most popular types.
Above/Lower contracts have the first place in any rating. You are assuming that the price will be above the current level or below. The $ example is just an example of an "Above/Lower" option: one person thinks the price will be higher than $90.44, another person thinks it will be lower.
For example, I think the rate is still going to go up, so I click "Buy," place a bid of $100. The trade is open; I see that the price is still below the original level.
Time has expired. At the very last moment, the price came close to the level, but it was still lower, not higher. I lost a hundred dollars. In the above/below category, the profit is now 70%:
This is a prediction about whether the price will touch a certain level or not. I can bet on "touching" any of them. Suppose I am betting on growth. If the rate on the chart touches or is higher than the top level in a given period of time, I will make money. If it is lower, I lose money. In this case it is necessary that the price will touch the lower level or will be lower than it.
The range is
If I believe that the price will be in the range after some time - I buy an option. If the price is out of the range by the expiration time, i.e. it is above or below one of its limits, I lose money. My profit on the "Range" now is 85%:
Approximately the same as the touch. There are two levels, it is necessary to choose which of them the price will touch in a certain time.
This is when one makes a bet on several instruments simultaneously - which of them will rise and which will fall. The return on each instrument at the moment is 70%. If all the forecasts are correct, I will earn 243% profit.
It is a guess as to whether the price will be above or below a specified level after five ticks. A tick is a single price change on a chart. So I bought a bearish option on USD/CHF, the price changed five times and was below the entry level - I made a profit. In the Turbo category the profit is now 75%:
Although recently binary options of this type on the same euro/dollar brought 95%
The list, of course, can be extended. There are also other options contracts, their description should be seen on the website of the chosen broker.
The standard set of assets is limited to the following types:
Indices of stock, currency and commodity exchanges;
Shares of companies such as Apple or Microsoft;
commodities, including oil and gas;
precious metals, gold and silver, platinum;
For beginning traders, the easiest option will be the commodities market assets - oil, gold, silver (you need to choose one of them). For each asset there is clear data for analytics, analytical sites and forecasts, which are released in the scheduled period, for example, for oil you can easily follow important data in the economic calendar, where each event plays a big role for the market.
In general, the concept of "the best, profitable and profitable" asset is very subjective and depends on the trader, his knowledge, previous experience, depth of market monitoring, stock of character. One has to know very well what factors influence the price of the selected instrument if one wishes to make a right forecast and be in the money at the moment of expiration.
· For currencies, these are first of all statements and decisions of the Central Bank governors, monetary policy, economic situation in the country, geopolitical and geo-climatic situation.
· Corporate stocks are influenced by news related to a company's operations: its purchase, sale, merger, demand for products, investments, general situation in the industry, etc.
· Exchange indices are formed on the basis of a group of several companies grouped on certain grounds (success, economic sector, industry, IT, etc.).
· The price of goods and raw materials is determined by their demand - demand, supply, yield (for agricultural crops), explored deposits for raw materials, geopolitics.
Types of accounts
Each broker of binary options offers its own range of services designed to make the life of a trader easier and to make his trading more profitable. The "Binary options accounts" section includes accounts that have gained popularity and trust of traders from all over the world. Binary options accounts differ from Forex accounts, but require not less scrupulousness in their choice. Binary options accounts are divided into three types, according to the duration of the expiry period:
1. Short term expiry
2. Medium term expiry
3. Long-term expiry
Choosing a binary options account - the course to profit
To ensure the most profitable and comfortable trading, a participant of exchange trading should choose an account in accordance with his needs and trading methods used. Each account has its own advantages and nuances, which is why choosing a binary options account is a carefully considered and individual process. When choosing an account, each trader pays attention to the most important for him conditions. For someone it may be the size of deposit, for another the number of trading instruments and for some the most important moment is profitability and expiry period.
The essence of a demo account is well-known - it is a virtual account with fake money on which one can get the first trading experience without fear of losing real money. There are not so many brokers of binary options in the world, which give an opportunity to trade on practice accounts. And for many it is very important.
First of all, it is important for any beginner trader, it is difficult to make the first step where the stake is often all your money. It doesn't matter how much it is, or how much you value that amount. With a demo account, even the most hesitant beginner with no previous experience can get started and gain the confidence to trade in a secure environment.
Whether it's when you're trying out a new strategy, adding a new indicator or a new trading tool, a demo account can prove invaluable to you, whether it's your first steps in binary options or just when you need to trade a new one.
Real trading account
A trading account in binary options is an account opened by a brokerage company for a certain client for the purpose of trading operations in exchange markets. The client can dispose of the money placed on it at his own discretion.
To put it simply, this is the same account as in the bank, only it allows the trader to make trading operations.
To activate a trading account, the following steps are required
1. Register with the broker of your choice by opening a personal cabinet (usually takes 2-5 minutes).
2. Go through the verification (confirmation by the broker) of your passport data, screenshots of which you send through a private office to the technical support of the website.
3. To fill the account in a personal cabinet of the broker ("personal account") through one of the payment systems: Skrill, Mastercard, QIWI, Visa, RoboKassa, DixiPay etc.
Open one or more trading accounts with this broker from the personal cabinet.
Trading deposit is an amount from which a broker opens a trading account for a trader.
Consider the VIP account from the leader of the popular binary options, the industry low-cost broker IQ Option. What benefits does the broker offer?
- Refund up to 60% of the amount in case of an incorrect prediction
- Bonuses up to 100% on deposit (up to 120% at the moment)
- Term of processing the request for withdrawal up to 1 day
- Personal manager
- Monthly analysis of trades analyzed by IQ Option analysts.
So, you've seen all the advantages of the VIP account, and now we can make a definite conclusion about the usefulness of this type of service, at least at the broker IQ Option, where the privileges for traders with VIP account provide serious advantages in trading, and the level of $ 1000 is not an excessive amount, and just is one of the most comfortable deposits for trading binary options and recommended by many experienced traders. So if you have the opportunity to deposit $ 1000 and get the status of VIP, you do not risk anything as you can always withdraw your funds with an accelerated consideration period.