Binary Options trading – II
Since the advent of binary options trade, many people have developed interest because of its simplicity. But, the simplicity notwithstanding, binary options is not a terrain to walk blind, because it’s not a game of luck. You should note that one person’s loss is another person’s gain and to make the profit, there is need to understand the binary options trading strategy.
Binary options trading strategy
Trading binary options are not gambling, it depends on well-planned, and carefully executed strategies you need to learn, master and execute. Trading in options without a clear strategy is gambling, and it’s risky. It should be noted, however, that there are as many binary options strategies as there are experts. But, the strategies can be summarized under the three broad techniques upon which various strategies emanate:
1. Trading strategies. These strategies focus on the creation of signals to direct the pattern of trading.
2. Money management strategies. These strategies focus on how to manage capital for trading.
3. Analysis and improvement strategies. These are activities to improve on the strategies.
In the implementation of the various strategies that at deployed strategically to meet overall trading objectives, many traders continue to look for ways to make their trading easier and more robust. Along the line of analysis and improvements, more trading ideas, resources, and tools are encountered such as using binary options auto trader to advance the course of trading for more profits.
Binary Options trading
Binary options trading refer to a financial investment where the trader is required to choose between two possible options to win or lose. The trader is to decide between a higher or lower price with respect to commodities prices, forex market rates, and indices. Where the answer provided is true, the trader’s investment has yielded a return and where it is false; the investment is lost.
Binary options present an excellent way for traders to know their risk and return up front before going into the trade. And for experienced traders, they are able to decide whether to make a stake in the trade or not. In particular, binary options provide the avenue to participate in the options market without large investment to help conserve capital for more trading exposures.
How binary options works
There are two possibilities for a trader to wager, with capped risk and profit potential according to the answer provided. If the question is the price of gold will be above $1,250 at 1.00pm today? If you say Yes, and invest your money to back your belief, and someone else believes it is No and buy options to back his convictions.
Note that options trading price is always between $0 and $100, which follows other financial market formats of ‘bid’ and ‘ask’ price.
Let’s assume the going market rate is at $42.50 (bid) and $44.50 (ask) at 12.30 pm. assuming you are buying at the time you will pay$44.50 and to sell at the time you will sell at $42.50.
If by 1.00pm the price of gold is above $1, 250, your option expires and is worth $100 because is true. You profit will be $100 – $44.50, equals $55.50 minus market fees, the balance is your profit from the trade and you are “in the money” in options term.
Conversely, if by 1.00pm the price of gold is below, not above #1,250, the options expire at $0 because it’s false. You have lost your wager, and $44.50 is lost. In binary options terms, this is “out of the money.”
Until the options expire, the bid and ask will keep fluctuating, during this time of fluctuations a trader can close their position to minimize risk. The ability to minimize risk is based on the trader’s experience.
In binary options, someone’s gain is the other persons lose and vice versa. The important thing to know about binary options is that the total value potential is $100. And depending on how much you won, if what you bought to win is $50. Your earning will be $100 minus $50, minus fees and the balance are your profit.