Stocks, investing, and trading is no longer something that is just reserved for people in the stock market. More people have become interested in investing their money.
That is why NFTs and cryptocurrency have become so popular over the last couple of years. Investing in these options has been made easy through apps, easy-to-understand guides, and a lot of publicity by famous people. But have you heard about binary options yet? If you are interested in investing, binary options just might be a good choice for you.
What are binary options, and how do they work?
Binary options are options for which the results of the trade can just have two possible outcomes: yes or no. Traders place a trade based on their estimate of the market. If they think the market is going to be above a certain price at a certain time, they can buy. If they think it won’t be, they can sell. Binary options are priced anywhere between $0 and $100. Because of these relatively low prices, and the information you have about gains and losses beforehand, you know exactly what you can win or lose with every trade. Risks are capped, and so are payouts. This principle makes binary options one of the easiest financial assets to trade with. But don’t underestimate how binary options work, though. There is a lot to be learned to profit from trading or social trading with binary options.
How to trade binary options in 5 steps
If you want to start trading binary options, there are some things that you really need to know to make the best of your trades. We will tell you exactly how to trade binary options in 5 steps.
Know the market trends
Before you trade anything, you need to know the market you are entering. Do some preliminary research and get to know the market. You can find a lot of information online, but you can also follow some training programs or courses to get to know the ins and outs of binary options. Through training and gathering information, you get to know the market, the trends, and your preferred strategies.
Pick the market you want to trade
There are different markets that you can trade. In the US, you can trade binary options through Nadex and CBOE exchanges. They offer different options to speculate on the market. For example, Nadex offers possibilities to trade on contracts based on forex, commodities, economic events, and stock indices. You can speculate on the Wall Street 30 (Dow), US 500 (S&P 500), US Tech 100 (Nasdaq), US SmallCap 2000 (Russell 2000), China 50 (China A50), FTSE 100, Germany 40 (DAX), and Japan 225 (Nikkei). Trades can also be placed on forex pairs, like EUR/USD, GBP/USD, EUR/JPY, or AUD/USD, or commodities like metal or energy.
Select a strike price and expiration
When placing a trade, you can select a strike price and expiration you’d prefer. The strike price is the value of the asset that needs to be exceeded in order for the option to be profitable. You ask yourself if the market will be at, above, or below this strike price when the option expires. As a trader, you can choose binary options that expire intraday, daily, or weekly. Intraday means that the options expire within the day. Daily options expire at the end of the trading day. Weekly options expire at the end of the trading week. There can also be event-based contracts that anticipate certain events or releases.
Place your trade
When you’ve picked the market you want to trade on and selected your strike and expiration, you can go ahead and place your trade. You can simply do this online through the platform you are using. You can select either the buy or the sell button, and fill out the number of contracts that you want to buy. Your maximum profit or loss will be calculated beforehand. If you are ready to place your trade, just confirm the trade.
Wait for expiration, or close out your trade early
After placing your trade, you wait for your trade to expire to know if you’ve made a profit or if you’ve lost. You can also opt to close out early. This can be done to limit losses or to optimize profit. Whether this is a smart move depends on a lot of factors, but the volatility of the market plays a big role.