The Beginners Guide To Binary Options
In this beginners guide we will assume you do not know what options are, and for sure don’t know what a binary option is. The best way to learn binary option trading is to open a demo account with one of the brokers listed on the right. Once you get comfortable with the trading platform, then you convert your account to a real trading account and trade real money.
Say you have a feeling about the direction a certain stock or commodity or currency is going to move. In the past week gold has been falling in the price from $1300 an ounce, to below $1200. Since you are the type of person who says “I am telling you, gold is going to drop another hundred dollars and ounce”. The way to make money with Binary Options is to buy a put option which means if the price falls then you make a 70% return. If the price goes up, then you lose your investment.
Binary options offer different time frames from 60 seconds to a day. This means, you can buy a put option that Gold will fall in price in the next hour and if you are correct receive a 70% return. Or you can say, by the end of the day today, gold will be lower in price than it is right now and if you are correct, then you make 70% return.
Many times the example of $100 is used, however you decide the amount of money to invest in the option. You can say I am willing to put down $10 that the price will be higher within the next hour or you can put down $1000.
This has all been about the movement in gold prices.
Now lets discuss using binary options for speculation on the price of Forex or the S&P 500. Many times stock market will have a sharp movement in price after an economic number is released. See the trading calendar here .
Traders will study the economic release calendar and see when important data is coming out, like the jobs report for example and buy a call or put option before the data is going to be released and then profit or lose once the data has been released based on their prediction.
So is there money to be made trading binary options? Well that depends on your ability to 1. predict the correct direction of price movement and 2. your ability to predict it in the correct time frame.
Many traders will correctly predict that for example Gold will rise or fall, the skill is to get the timing correct so that your option does not expire worthless.