Binary Option is a financial product that is based on fulfilling a certain condition at a certain time, where the trader receives a payment that is predefined or loses the investment based on whether his price change forecast was correct.
How Binary Options Work
Three key elements make up work on Binary Options:
1. Base Market – This is the market in which you choose to trade (eg the EUR / USD currency pair).
2. The strike price – The strike price is key to the Binary Option decision-making process. It is considered the price from which the trader opens a position for trading. To close a trade, you must decide whether the base market will be below or above the strike price.
3. Expiration Date and Time – You can trade the Binary Option for one minute or more.
Binary Options trading offers defined risk and potential profit. They are considered “binary” because after the prediction expires, only two outcomes are possible: either you make a predefined profit or you lose the money you paid to open a trade. This makes it easier for you to decide whether to trade, because you know exactly how much you could lose if the market moves against you or, otherwise, you know the exact size of your potential profit, making this a controlled way to trade.
Higher / Lower (Call / Put) – the simplest and clearest form of Binary Options, indicates the predicted price movement. If the trader believes that the price will rise, he takes the Higher option, if he believes that the price will fall, he takes the Lower option. It is sufficient for there to be a minimum price change from the strike price from which the trading position is opened, for a given time period of forecasting, for the trader to make a clearly defined potential profit if his forecast is correct or to bear a clearly defined loss in case his prediction is incorrect. In the event that after the expiration of the time set by the trader for trading, the price remains at the same level as the strike price from which the trading position is opened, then the trader does not make a profit or incur a loss.
Advantages and disadvantages of trading on Binary Options
– Unlike Forex trading for example, Binary Options can give you the opportunity to increase your own income faster. Read more → What is the difference between Binary Options and Forex
– By using short-term options, you can make a profit in literally a few seconds, of course with the appropriate knowledge and experience.
– When you open a trade, your potential profit and loss are defined in advance, depending on whether your prediction will be correct or not. You can’t lose more than what you invested!
– The minimum deposit for starting on a real account on the IQ Option platform is 10 €/$, you can open a trade with as little as 1 €/$.
– You can trade on any device (home computer, laptop, smartphone or tablet)
– The only and the biggest drawback of Binary Options is that they are susceptible to fraud, in the sense that due to the large number of fake companies that offer these services, and because of that it often happens that people come across one of these companies and experience an unpleasant experience. . This is where you need to pay the most attention! That is why we recommend you to use the IQ Option platform, because it is a world leader in Binary Options and a legally regulated company. We have been using it for many years and have never had a problem. You can find out more about how we opted for IQ Option in the text How to trade on Binary Options (section Why IQ Option).
*** Trading on Binary Options carries a high level of risk. To be successful, you need to gain some knowledge and skills related to trading on Binary Options! Any unscrupulous and reckless behavior in the trade can cause losses of some or all of your investments! That is why we are here to pass on our knowledge and teach you how to trade successfully.