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.