What are Binary Options? -Trading Guide

Getting Started with Binary Options Trading

What are Binary Options?

Binary or Digital Options are a relative new Financial Instrument. Binary Options provide only two possible outcomes Win or Lose (0/1). Binary Options Trading has become very popular among world traders as it provides a simple way of trading the daily fluctuations in the Global Financial Markets. Binary Options are classed as an Exotic Asset Type.

Why Binary Options Have Become so Popular?

(i) Easy Trading Environment (even for Beginners)

(ii) Pre-Determined Risk and Reward

(iii) Make Profits from both directions (Bullish and Bearish Markets)

(iv) Make Profits even from tiny fluctuations

(v) Trade 24/5 any Financial Market (Stocks, Forex, Commodities, Metals, Energy, Indices)

(vi) Trade in Different Time-frames (from 1 minute to several months)

(vii) Flexibility -Build your own binary options via Features such is the Binary Options Builder

(viii) Take advantage of High Bonus Promotions

High / Low Binary Options

The most common type of binary options is the High / Low type. High / Low options offer fixed-return and fixed-risk and the only thing that is required for a profit is to predict the correct direction of a Financial Asset at the end of a specific period.

Expiry Time

The end of this specific period is called an Expiry Time and it may last from 1 minute to several months.

Strike Price

The Strike Price indicates the price level at which a trading position closes with a profit or with loss.

■ Review and Rate Binary Brokers at BV Directory: » Binary Option Broker Directory

Call / Put Binary Options

This is the same type of Binary Options as the High / Low options. If a binary options trader predicts a bullish market then he buys a Call Option if he predicts an upcoming bearish market then he buys a Put Option.

You can remember the difference as:

1) Put Down –Bearish Markets

2) Call Up –Bullish Markets

In the case of a Call Option:

-If at the end of the Expiry Time, the price of an asset is below the strike price then the position lose money

-If at the end of the Expiry Time, the price is above the strike price then the position earns money

Payout Rate

The Payout Rate indicates the profit that you will earn if your prediction is right. That profit is measured as a percentage (%) of your initial investment.

Usually popular assets such is EURUSD, Gold and Crude Oil offer better Payout Rates than less popular assets such is for example a less liquid Forex Pair such is EURAUD or Sugar or Corn.

The payout rate is one of the most crucial criteria when you choose a Binary Options Broker. Most Binary Options Brokers offer today maximum Payout Rate between 80% and 90%.

Refund Rate

The Refund Rate is a percentage (%) of the initial investment that returns to traders if a position is lost. For example if your prediction is wrong and you have lost a trade then you take back a percentage of the value that was lost. Refund Rates are not offered by all Binary Option Brokers. Refund Rates ranges between 5-15%

Combining Payout and Refund Rates in Order to Evaluate Binary Option Brokers

Tip: In order to compare the profit potential between different Binary Options Brokers you can sum the Payout and Refund Rate, and then compare them:

Example:

-A binary options broker is offering 70% Payout Rate and 10% Refund Rate. In total you can think this profit potential as 80%

-Another broker is offering 90% Payout Rate and 0% Refund Rate. In total this profit potential of 90% is higher than the previous broker

■ Compare Brokers: » Forex Traders | » Oil Traders | » Trading Indices | » Gold Traders | » Stock Traders | » US Traders

 

Other Popular Types of Binary Options

As it was mentioned before, the High / Low options are the most common type of Binary Options but there are other types as well.

Range Boundary Binary Options

A Range or Boundary Binary Option offers traders the chance to select a particular range of the price of an asset and trade it.

-If the price of an asset remains within a particular range at expiry then the trading position is gaining a payout.

-If the price of an asset moves out a particular range at expiry then the trading position is lost.

A Range Option has actually two strike prices that combined form a price range.

This type of trading can be considerably profitable when it is used in Ranging Markets. Financial Markets are usually Trending or Ranging. Trending markets are following Strong Trends while Ranging Markets are moving in particular ranges. When these ranges are reached then the trend is moving the other direction.

Touch / No Touch Binary Options

Touch / No Touch Binary Options offer traders the chance to forecast that the price of an asset will reach or will not reach a certain price limit. Touch / No Touch binary options are similar to the High / Low Options, the difference is that Touch/No Touch options are designed for forecasting the extent of a price movement.

Touch Binary Options

-If the price of an asset touches the particular limit that a trader has forecasted then the trade closes profitable.

No Touch Binary Options

-If the price of an asset does not touch a particular price limit as a trader has forecasted then the trade closes profitable at expiry.

60-sec or Turbo Binary Options

60 Second Binary Options or Turbo Options means forecasting the direction of a financial asset during only the next minute. 60-Sec options are highly speculative instruments and expose traders to high risks. You are exposed to what is called as the Market Noise. We do not recommend this type of trading especially as concerns no-professional traders. In any case if you want to trade 60 second options, first try to trade them in a demo account. If you can see positive results in the demo-account then you can move to a real account.

Binary Option Pairs

Binary Option Pairs offer the opportunity to trade one asset against another asset of the same class. For example you may trade one share against another. If you believe that currently the Apple Share is oversold and Facebook share is overbought, you may trade that market inefficiency via a Binary Options Pair. The great advantage of Binary Option Pairs is that you may eliminate 100% the effect of the general market. That means that you don’t care about the conditions of the economy or the special conditions in any Financial Market.

■ Review Brokers Offering Option Pairs: » CapitalOption | » GOptions | » StockPair | » OptionRally

Binary Options Builder

An Option Builder is a trade type that allows binary traders to design their own binary options. This feature is based on Call / Put Options and it is mainly provided by brokers using the SpotOption platform.

Option Builder Features

(i) Choose your Trading Asset

(ii) Choose your Expiry Time

(iii) Choose Direction and “Call” it up or “Put” is Down

(iv) Choose the combination between the Payout Rate / Refund Rate

(v) Enter an amount to trade

An Option Builder provides traders the chance of enjoying high flexibility.

■ Review Brokers Offering Option Builder: » OptionRally | » GOptions 

 

Final Words about Binary Options Trading

Binary Options Trading is not as easy as it looks. First of all you must choose your broker wisely. Binary Options constitute a relative new asset class so most binary options brokers are not yet regulated. That is why you should give extra weight to where a binary options broker is situated. Prefer brokers maintaining headquarters in countries with tight legislative framework regarding Financial Companies (US, UK etc). Avoid binary option brokers maintaining headquarters in offshore countries (British Virginia Islands, etc).

 

Review Signals and Systems: » Binary Option Systems | » Binary Options Signals

Reviews: » Binary Option Broker General Directory

Read More: » Trading Tips » PlatformsRating Formula

 

■ What are Binary Options? - Getting Started with Binary Options Trading

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