As one of today’s most popular kinds of simplified trading products, binary options are now traded by everyday investors and not just large financial institutions.
Why are they so popular? Not only is it extremely quick and easy to execute trades, but binary options offer short trading durations and high returns.
Furthermore, traders have access to a liquid, 24-hour market.
There are two major types of binary options and several strategies for trading them, but consider this an introduction to your own “options” as a binary options trader.
Perhaps the greatest benefit of trading binary options is what you don’t have to do.
All-or-nothing options
Success with ordinary options requires a high level of proficiency, foresight and luck; it’s easy to pick the correct price direction yet still lose money by anticipating the wrong quantity of movement, or by the price changing too quickly or too slowly.
Despite their simple-sounding name, plain “vanilla” options are a complex trading vehicle with a number of interacting variables that can reduce or eliminate profits even when you appear to have made the right decision.
As a result, trading vanilla options requires tremendous precision and timing in order to be successful.
In contrast, binary-option traders need only anticipate the direction of the price movement; all that needs to happen is for the asset’s valuation to breach your strike price in the correct direction (the strike price being the price above or below which you expect the asset to be valued at a specific date and time).
Consequently, little market movement is even necessary to profit from many trades.
This “threshold” nature of binary options gives rise to the term all-or-nothing options.
A variety of underlying assets
Another unique reason why binary options are an appealing trading vehicle is that they are available for a variety of underlying assets, including stocks, indices, Forex and commodities.
So, whether you’re familiar with equities or focused on currencies or prefer to have exposure to all of the above, binary options are equally accessible to everyone.
And if you have experience in the underlying assets, your expertise will carry over into your binary-options trading and give you a new, powerful way to profit from the market.
So, now you have an idea of how traders of all skill levels can profit from general market movements in a simplified manner.
