Trading binary options is a simple process. Trading profitably, however, is another story altogether. If not careful, an investor can lose his/her capital in a manner of minutes due to the high volatility of the binary options market.
What Is Binary Options?
In a nutshell, participants of binary options trading attempt to speculate if an underlying asset can break above or below a certain price at a certain period in time. If their predictions are correct, they gain cash. If not, they lose cash. As simple as it looks, beginners must fully understand how the respective market works and find a trading style that they can consistently make money with. Here is a guide on how to trade binary options for beginners.
Why Trade Binary?
For starters, binary options offer a means to participate in the market with capped risk and capped gain potential, based on a heads or tails proposition. For instance, if you believe the price of gold will be above $1,250 at 1:30 p.m. today, you buy the option. If you think otherwise, you sell it.
Traders who prefer to open and close trades quickly to make quick gains can also benefit from trading binary options. You can look for transactions that are close to expiration and buy/sell the options.
Where To Trade Binary?
My preferred binary options broker is Boss Capital. They have a great trading platform, plus offer a 100% bonus match deposit if you open an account with at least $250 USD.
Binary options can be traded through the Nadex Exchange, which is the first legal US-based exchange governing the financial asset. Nadex has its own browser-based platform that traders can log into through demo/live accounts.
Binary options can also be traded via the Chicago Board Options Exchange. To trade through CBOE, the participant must have a brokerage account approved to trade binary options. Know that not all binary options brokers provide binary options with their trading accounts, so do your research before signing up your money with a broker.
When To Trade?
Time frames are especially important when trading binary options. A trader trading with Nadex can trade binary options that have an expiry between hourly, daily, and weekly time frames. Hourly options offer traders numerous opportunities to participate on a daily basis, even in passive market conditions.
Trading binary options can be a risky pursuit. One must first examine the market and its components and familiarize themselves with how the entity works. Beginners should start off with demo accounts that do not risk real money. After a few months, they can then start trading a live account with minimum deposits.
Tarik Pierce is the founder of InvestorTrip.com and regularly contributes articles to this website.
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While his background is mostly related to trading stocks, he recently gained interest in real estate crowdfunding with Fundrise.