Binary Options Trading - How does it work?
Binary Options are the new and simple financial trading products available to both new and experienced traders. Binary Options are a form of an options trading that provides a fixed deadline for expiry time with a fixed payout. Binary Options trading has only two outcomes for traders to predict and then choose between them. They offer traders a quick and easy way to make a profit from correct predictions (CALL or PUT)on the value of a financial asset over a defined period of time. Depending on whether the trader’s prediction is correct or not, the profit or loss of the trade is decided.
Binary Options trades have limited risk, meaning traders know how much they are risking in trade in advance. Fixed returns based on a percentage of the initial investment are also known in advance for a profitable and successful trade.
This makes understanding and trading Binary Options very simple!
The sequence of executing a Binary options trade are:
1. Select the ASSET (EURUSD, GOLD or any other asset).
2. Select the amount to invest (Starting from 1$ ).
3. Predict the direction of the price movement of the ASSET (up or down) after 1 Minute or 1 hour (or any other time frame) and click CALL (for UP) or PUT (for DOWN) button.
4. The trade is automatically closed at the expiry time. If it’s a winning trade, the profit is automatically credited to your account.
For example, if you predict the value of Gold or Silver will increase today, and you are proven correct, you win a fixed payout. If the value of Gold or Silver drops, you lose the entire amount of the investment. It does not matter if Gold exceeds the original price (called the strike price), by $0.05,$1 or $50, the payout is the same.
It really is that simple and you can invest as low as just $1 per trade! Minimum trade amount varies from broker to broker.
A more detailed example for you, if you predict the value of USD/JPY will increase over the next 1 hour. USD/JPY is currently trading at 120.485 and you invest $100 on the trade. Since you predict USD/JPY will increase you select the CALL button. If after 1 hour USD/JPY is trading above 120.485 as you correctly predicted your trade will be automatically closed by your Binary Options broker for a profit, in this example the return is 85% so your profit on a $100 investment is $85 ($100 x 85% = $85). You have received an 85% return just for predicting that the value of USD/JPY will be higher in 1 hour. You can trade Binary Options over hundreds of financial assets from around the world, not just gold or EUR/USD, all from the one account. These assets include currencies (forex), indices, commodities, stocks.