Traditional investment opportunities are an expensive pass time, whether you intend to buy shares to help with a retirement fund or simply to see if you are able to generate a good rate of return. There is also a substantial chance of losing a large amount of funds; it is possible to have losses far in excess of your initial funds. Choosing to experience binary trading is a viable alternative to this. There is no requirement for huge amounts of capital to get started; most brokers only ask for a $250 deposit and will even provide you with a welcome bonus. An option can be purchased for $1; the rate of return is the same whether you have a $1 trade or a $10,000 one. Of course actual profit is different, eighty percent of $1 is just eighty cents; it is $8,000 when your investment is $10,000.
Being able to experience binary trading with such a small amount ensures you can practice and develop the best binary option trading strategy for your needs. There are a variety of potential assets and options to trade in, although you should note that only funds invested during a trade are at risk. Funds not used cannot be added to a trade to increase your return or your loss. In fact, this type of trading is known as binary because the word literally translates as two options. This type of investment vehicle can lead to one of two outcomes; your prediction is right and you generate an agreed profit from your trade, or, you can be wrong and lose your investment funds. You will always know the maximum funds at risk and the most profit you can generate before you commit to a trade.
There are brokers who will even offer you a small percentage back on trades which end up going against you. These brokers will generally have lower rates of return but the risk in trading this way is reduced even more. Because it is exceptionally easy to start trading and to understand the basics of binary trading there has been a huge increase in the number of people trading in binary options; this is also demonstrated by the fact that there are far more binary brokers now than there were just seven or eight years ago.
The Basic Binary Options Trading Strategy
Anyone new to trading in these options should start by using the basic approach whilst they learn more about the markets, the different techniques and the options available to traders. The simplest form of binary trading involves looking at the price of an asset and deciding whether it will move up or down. For example, you could look at the price of a Microsoft share and see that it is currently $200. You can then look at a chart showing the price movement for this asset over the last hour, or even the last week. From this you will need to decide whether it is likely to go up, down or remain the same. Your broker’s screen will show the asset and its current price as well as a small piece of history. On the side of the screen you will see two options. You can either choose to place a call option; which assumes the price will rise, or a put option where the price will decrease. There should also be a box which indicates the rate of return possible on this trade and a box to input how much you would like to trade. Finally there will be an option expiry time which tells you when the trade will finish.
If you assume the value of the shares will rise then you will select the call button and then wait. If, when the trade finishes, at the indicated expiry time, the price is $200.01 or higher then you will have predicted correctly and will receive the indicated profit. However, if the price ends at $199.99 it has gone down
Getting Started
Having understood the basic binary options strategy you will probably be eager to attempt trading yourself. Fortunately this is a very easy process. You can choose a broker based on a personal recommendation or on the rate of return they are offering. It is worthwhile looking at the bonus scheme they offer and checking its terms before you commit to a particular scheme.
You will then find an option on their website to create an account. There is a short form which needs to be completed and your account will be open. You will not be able to trade until you load your account with the minimum deposit; as indicated in the terms and conditions. You can add funds to your account via most debit and credit cards, it is also possible to use wire transfer and a selection of electronic options. You can then place your first trade; with a little patience and an understanding of the basic binary options trading strategy you can start generating a profit.
