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Trading these options is easy to learn. The concept of two possible choices is easy to grasp. Even though it is this easy to trade binary options, they are a bit more complicated to master. We will try to explain some of the less known things so you could get a better picture of this rather new trading form.
There is a very easy way to explain binary options, or to be more exact the way they are traded. It all comes down to one question. Will the specified asset’s price be above the certain number at a predetermined point in time? If you believe it will be then, you can buy that option. But if you don’t agree with that then you can sell the option. If the choice you chose proves to be right then you have won (you get your investment back plus a predetermined return). If that isn’t the case, then you lose the money placed on the trade.
Content goes here Binary trading is a zero-sum deal type. In this instance, it all comes down to either zero or 100 dollars. Once again this is a very simple concept which is easily explained. The base value of every binary options trade is 100 dollars. This means that whenever you win a certain amount, another trader loses that amount of money. 35 dollars worth trade is cheap as the trader risks only 35 dollars if they fail to win the deal. But the trader that chose the other option has to pay 75 dollars, and therefore they risk that money if the other dealer wins. In the end, a trader that wins takes the money from the trader that lost.
So, you may wonder how the bid and ask numbers get set. Well, it all up to dealers. If the operators can’t decide whether the option will go up or down, then both prices may be close to 50. If the majority of the traders think that the trade might go through then, the price for the call option will be over 80 percent and vice versa.
Binary options trades have predetermined fees. There are two basic costs, 0.9 dollars for the entry of the trade and the same amount of the exit out of the trade (if the business results in the loss then the exit fee aren’t present). But beware, the majority of the brokers use additional fees to get more money out of the traders. So, before you start trading, be sure to check what kind of taxes the dealer uses.
Every binary options broker should pick their binary market and the time frame in which they trade. Choosing one asset class and trading assets from it makes it easier to follow the changes on the market. Choosing a right time frame isn’t something a trader shouldn’t think about. Some assets trade differently in specific time frames. Finding appropriate time frames and using them to generate a profit is the most important skill a binary options trader needs to master. More information about binary trading you can find at https://en.wikipedia.org/wiki/Binary_option.Read More
One unified market has better stability than several smaller individual markets. EU is there to unify those markets and simplify many complicated processes. The fact that Great Britain left the European Union will create a wave of economic consequences, and binary options will go through some changes as well.
People that voted for the exit of the UK out of the EU said that their country lost authority over the legal decisions in their country. But right now, Britain has zero power over the decisions made in EU. Costs of regulations and laws are high and from now and in the future Britain will have to finance all their decisions alone without any backup from the EU.
So, how this affects binary options? Well, it all comes down to the registration of the binary options brokers, which is done over CySEC aka Cyprus Securities Exchange Commission. Every binary options company that wants to offer their services to the citizens of the UK will need to complete a registration through FCA aka the Financial Conduct Authority. Up until now, this wasn’t necessary as the regulation process went through EU authorities. But, that will change, and the costs will have to be paid by both the companies that apply for this registration and the citizens of the UK (through taxes).
The world of binary options went through a lot in last several years. Until a few years ago the world of binary options was full of scammers and frauds. There was a widespread lack of control, and there were no laws that would regulate binary options trading. This changed with the implementation of several laws and introduction of the CySEC. All brokers regulated by CySEC will meet a series of legal obstacles over the next two years. As long as there is a part of the UK still mingled in the EU it will cause ripples through financing world. Legal hardships are still unknown, but all parties are confident that it will be a long and strenuous time.
No broker is registered in the United Kingdom. All agents from the Europe are recorded in France, Germany or Cyprus. What will happen when the Brexit comes in full power no one knows? British binary options brokers may find themselves on the crossroad, and they may go down due to legal complications.
Some of the best brokers are located in London, so what will happen to them is still unknown. If the costs of new registrations exceed normally expected numbers, they may decide to shut down their business and move somewhere else. Other companies may simply lose their British traders, which will result in loss of profit. How extensive the damage will be we will have to wait and see.Read More
Think about all or nothing gamble and add some trading knowledge and you have binary options. They are also called exotic options, and they offer two options to a trader, a fixed return or a full loss of the investment. As it is stated in the term, these options give two options to the merchant (in last few years some new options were presented to the traders, but the rules remained the same, win a fixed amount of money or lose the money you invested).
The simplicity of the trading is the main reason behind the high popularity of the binary options. A trader who deals in binary options doesn’t need years and years of buying experience to earn money. That trader has to follow only two things, expiry time and the direction in which the price is moving. To generate the profit a dealer has to guess two things, the direction in which the price of an asset will move and the expiry date on which the price will be over the chosen number.
Traditional option trading utilizes the amount of the movement of the price, which affects the possible return. In the case of the binary options, this is irrelevant. The most important thing is that the price goes over a chosen number at the time of expiry date. This sounds simple because it is simple. But it is important to understand the risk this form of trading has.
Many online articles define binary options as just another form of gambling. And they are partially right. We say somewhat only because some binary options brokers reduce this trading form to gambling as they remove or break the most important factor of the binary options which is the underlying asset. The underlying asset and its price are the backbones of the binary options trading. A trader has to guess, based on gathered information, where and when will the price move. This is the difference between the gambling and the binary options trading.
Binary options become gambling only when the broker removes the underlying asset from the play. This is done by not aligning the price movement of the property on the broker site and in the real time. In that case, the trader can’t use the information to guess the direction or the time of the price movement. Every “trade” over a broker like that is nothing more than a flip of a coin.
Some traders tend to get carried away. They do that due to the simplicity of the binary options. Once they lose a considerable amount of money they go around telling people how they lost the money through gambling with binary options. The best way to prevent this situation is education. General knowledge about binary options is optional, but extensive education about the market and the underlying assets is a must. Every trader should pick few assets and learn everything about them, how they move, what affects them and so on. Traders also need to grasp the existence of the “butterfly effect” in the world of trading (One small event may cause big ripples all over the market).Read More