Getting started with binary options

For those unfamiliar with binary options trading, and the huge number of platforms available to trade, getting started with binary options can seem a bit daunting. Just the name alone can be confusing as the world of options used to be reserved for bigtime traders and involved complex transactions in stock market trading pits. Thankfully, options trading and binary options in particular has moved on quite a way since then and getting to grips with how to begin trading can be explained in just a few steps.

1. Understanding the concept of binary options

Binary options are purchased by investors who simply think that the price of an asset (e.g a stock, currency or gold) will be higher or lower than the current price in a set period of time. The periods of time are flexible so this could be in 60 seconds, one hour or up to one month. It doesn’t matter what the price does before this expiry time, but binary options will either expire ‘in the money’ or ‘out of the money’ depending on if you have chosen correctly for the price to be higher or lower at the precise moment of expiry.

2. Using a binary options trading platform

Binary options trading platforms are the web-based programmes where traders can invest in binary options. There are many of these companies available including some of the most respected in the industry.  Setting up a binary options trading account takes about 5 minutes and can be completed online. Once the account has been registered traders can deposit funds in to their account and begin trading binary options with real money. Alternatively, many binary options platforms provide a demo account which traders can simulate their trades until they feel confident enough to trade with real money.

Binary options platforms are considered to be one of the most straightforward trading experiences available. The interface of the most popular brokers provides the price of the assets that it offers (traders can view the asset list of their platform to see the full range) and a simple higher or lower option which when selected will allow binary options to be purchased.

3. Purchasing binary options

Binary options are considered one of the most sensible ways to trade due to the fact that a trader knows exactly how much they are set to win or lose before the trade is placed. Both the profits and losses in binary options are therefore predetermined as a percentage of the amount a trader is willing to invest. With a profit rate of 80%, for example, a $100 investment will return $180 if it closes in the money. Purchasing the binary options is very simple through the trading platform once an asset has been selected to purchase higher or lower. A window within the platform will allow the amount of investment to be entered and will automatically configure the level of profit and loss that a winning and losing scenario will offer. A timeframe for the expiry of the binary options can be chosen and the ‘strike price’ (the price that the options are purchased) will be set as soon as the binary options are purchased.

In order to add to the possibility for profits for traders many platforms allow traders to close their positions early or ‘roll-over’ (extend the life of the binary options) which can be very useful for both winning and losing positions.