Saturday, April 25, 2015

What Are Binary Options?

Binary options are a unique form of financial investment that permits traders to generate profits from correctly forecasting the future direction of price movement for a specific asset. When using the fundamental type of trade, the trader only has to determine whether the price of a specific underlying asset will be higher or lower than the price at market entry when the trade closes. The straightforwardness of this style of trading allows anyone to become a trader, with no previous market experience required.

Each and every binary options trade is linked to a specific expiry time at which the trade is considered final. These time-periods range from mere seconds to an entire year. The vast majority of traders prefer short-term expiry times, as these yield the fastest profits. All trades, regardless of expiry time, profit only two potential outcomes: profit or loss. Both amounts are fixed and known in advance, with the offered rate of return being provided by the broker and posted upfront, and the investment amount being decided upon by the trader.

Each trading platform will include several distinct types of assets, with most platforms providing trade opportunities for stocks, indices, currency pairs, and commodities. Each of these asset classes will include several underlying assets. For example, the stock group could offer assets such as Google, Amazon, Exxon, Apple, and more. Asset selection is the task of the trader, which means that everyone can pursue only the most attractive trade setups.

The aforementioned standard trade (will the price go higher or lower?) tends to be the most popular among traders. Even so, there are other options to consider. Most platforms provide a variety of instruments such as One Touch, Ladder, Pairs, and even Forex. Each of these performs in a different manner, yet all include the necessity to be able to forecast upcoming price movement with some degree of accuracy. Each winning trade will provide a return of 65% to 85%, with select high-yield trades offering returns as high as 1,000%.

How is future price movement accurately predicted? The simple answer is analysis. The are two types of analysis, technical and fundamental. Technical relates to numerical data which can be viewed in price charts. Both current and past price movement can be evaluated within charts. Fundamental analysis relates to market news and reports which can influence asset price movement. Investor sentiment is directly linked to such reports, and it is the opinion of the investor which truly dictates where a price may go.

The transparency and straightforward nature of binary options trading renders it an appealing form of investment for anyone who would like to profit from the markets. Buying and selling shares is not a part of the process, and varying profits and losses are eliminated. The minimal learning curve, extremely low start-up cost, and high returns are also appealing, and are just a few of the reasons as to why thousands of new traders start to trade binaries each and every day.

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