What Is A Binary Option?

Binary option is a financial term referring to a type of trading option with only two possible outcomes. (Binary means double or twofold.) The binary options trader bids on whether an item currencies, stocks, commodities or indices will increase or decrease in value within a limited, usually very brief, period of time. On any given transaction, the trader will receive either a certain predetermined amount or nothing at all, according to whether or not his prediction turns out to be correct. While obviously high risk, this type of trading can yield a great amount of profit in a short time. Binary trading via the Internet has recently become quite popular, since websites for binary option trading platforms first began to appear on the Web in the year 2008. At present there are approximately 200 of these websites in existence.

How It Works

It’s easy to get started with binary trading. Simply set up an account with an online binary trading site and make a deposit. Whenever you would like to do some trading, log in to your brokerage account with your personal user name and password. Choose the item you would like to work with and decide whether to call predict that it will go up in value or put predict that it will go down. You’ll also need to select a specific option expiration time and the amount of money you would like to invest. Then it’s a matter of waiting for the end of the option expiration period.

What to Expect

If you were correct and the stock, commodity, currency or index has risen or dropped as you predicted, you will receive a payout on your initial investment. This is usually 67 to 81 percent, according to the trading website and the type of trade. So if you originally invested $100, for example, you will end up with $167 to $181. However, if you proved to be wrong, you will usually lose the entire investment. (There are some sites that offer a small payout even if you made an incorrect prediction.) This means that, in order to succeed at this kind of trading, you should be an educated investor. You will need to monitor the market trends and develop a sound binary option investment strategy.

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Practicing For Free

Practice is an ideal way to help hone your investing skills. A number of binary option trading platforms offer to opportunity to try out some virtual trading for free. Often they will ask that you register an account with them beforehand, so that they can make a free initial deposit of trading cash to get you started. This is worth taking advantage of, so that you can learn the ropes in this unpredictable field.

Choosing a Good Online Trader

Look for a binary options trader that offers a good rate of return compared to others in the marketplace and that will pay you a small return even when you are wrong. A platform with a wide selection of assets will provide more opportunity to choose an asset that is showing a clear trend. Avoid any site that is overloaded with extra charges for its users. A trader that cares about solid customer support and security is worth doing business with.

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