Binary options are types of option in which the payoff is either all or nothing. For this reason, the term all-or-nothing option is often interchanged with binary options. Sometimes they are also referred to as digital options or Fixed Return Options (FROs).
Types of binary options
Classical binary options
These types of options are the international standard and are basically the core of binary options trading. With these, you will speculate whether the given asset will be lower or higher in value than predetermined rate at a given time in future. For instance, you can sell an option and earn a profit if the price of oil stays under $100. This trading is one of the easiest in binary options trading. Payouts are made depending on the broker as well as the amount to. For example you can get 80% and if you lose you will be able get10%.
Though an international standard, these types of options are given different names by different brokers. Some call them, High/Low, some Put/Call and others “up and down”.
One Touch option & Double One Touch option
This is a type of binary option where a trader agrees that if the asset can be traded upon at a specific rate, and then he will be getting a profit, which is also set in advance. The rate at which the asset is traded is known as a trigger. If the asset reaches the trigger value, the trader would get the agreed payout amount. Therefore, the trader is aware of what amount he will be able to receive if the asset reaches the trigger, or in case of failure, the loss he would incur.
Similar to the One Touch option is the Double One Touch option, but in this case the trader is allowed to fix two triggers for the asset .The trader will get a profit when the trigger value is reached. However, the Double One Touch option is only available if the trader can speculate that the market is highly likely to move towards an upward trend but is not completely sure of the direction the market would move.
No Touch option & Double No Touch option
Another type of binary options is the No Touch option. In this trading option, there is a contract that specifies the trigger value and the time frame within which the asset/currency has to reach the trigger in order for the trader to earn profit. The trader has to keep in mind that if the trigger is much higher, chances are that the currency may not reach the trigger, and so he would incur less profit or even a loss.
The Double No Touch option is usually taken by the trader when the market is less encouraging. In this case, the trader assumes that the currency will not reach either of the two triggers that they have fixed. The option is preferable when the market is very likely to move towards consolidation.
With these types of binary options, an upper and lower boundary is defined and the rate over a given timeframe can lie inside or outside of the boundary. In this, you speculate whether the rate will remain between two boundaries, and of course hope that there will be no volatility, only a sideward movement. Boundary options can be the best option especially in volatile markets.
Now days where inflation is more than the income percentage increase, it becomes very important to have some extra income. There are numerous ways to earning extra money to help your family to get what they desire easily. The best way to do it is trading in shares and debentures. This is the work that you can do online and that does not require any of the degrees or diplomas. The only thing that you have to keep in mind is the trend of the market. Before doing any kind of the study or start trading, following are the few things that you should keep in mind before you start trading online:
Open a DEMAT Account: This is the first thing that should be considered when we are thinking of trading online. DEMAT Account is a service that is been provided from different banks, that helps you to deal in the different shares and markets easily with some charges. Through DEMAT, a software is provided through which you can buy and sell shares online and a representative is assigned who advises about the things to be done to make profit.
Charges Applicable: Whenever you choose the financial institution to help you with trading online, you should be aware that you might be charged with the commission on any kind of trading you do online. So, before choosing and of the services of the financial institution or the banks, you should make sure the commission rate charged on every purchase and selling of the market survives. You should choose the institution or the bank that charges you the lower commission for trading online.
Proper Knowledge: When you are trading online, proper knowledge of what is going up and what expects to come down in relation with the market trend is necessary, if you make the wrong decision about anything, then you might end up losing your money in the market. So, it is very important to understand the different things that are been offered in the market and what is the trend that is been followed by the market in respect of the shares that you want to purchase.
Choose the segment: When you have decided for Trading, it becomes very important for you to decide that in what section of the market you want to trade in. There are many sections that are available in the market like trading in shares, day trading that means buying and selling the shares on the same day, call and put are the few of the options that are available in the market that you can choose from.
Stop Loss: Whenever we are doing anything in the market, the purpose is to make profit, so it becomes very important to specify the stop loss for any activity that we do in the market. Stop loss is the amount that is specified for all the purchases that we do in the market which means if the share reaches the specified stop loss amount, it will be automatically sold. This is the best practice to follow when it comes to the online trading that reduces the chances of getting loss in the market.
All the above points should be kept in mind while doing online trading. These are the few points that teach you How to Trade Online.
Binary trading is becoming more popular. Many of the people invest in it because it yields extraordinary profits instantly. These people do not know that larger profit means high risk. So if you are planning to invest in binary trading you need to understand how it works. Here is a quick guide on binary Options vs traditional Options
Both binary options and traditional options are types of derivatives. Their prices are derived from the values of assets. They are basically contracts that give the trader the right, but not the obligation, to sell or purchase an underlying asset at a particular cost on or before a certain date. These assets can be currencies, stocks, bonds, indices or commodities.
There is a remarkable difference in the expiration time between Digital Options and Traditional Options .Traditional options normally offer quarterly or monthly expiry times. Binary Options have expiration times at monthly points, weekly daily and, hourly, thus allowing one to make a trade within 5 – 15 minutes before the expiration time. The short multiple expiration times enable investors to make profit instantly providing more flexibility in their investments options.
In binary options the payout is predetermined on the onset of the contract and can vary between 50 – 90% if it expires ‘in-the-money’. In traditional options, the payout is totally variable. An investor pays per each contract. This means he makes profit or loses depending on the number of pips (pays per each contract) difference between the strike price and expiry level. Unlike the binary options where the outcomes are fixed from the start
The sale of Traditional option can be carried out at any point up to the expiration time. Execution of a Digital option is only performed during expiration period. Binary option investor must hold firmly onto his option until the expiration date. He must be more careful when purchasing the options because he cannot sell them again once purchased. In traditional options, an investor can sell an option at any point before expiration period, making it more flexible.
Binary Options offer yes/no simple investment decision that can be made several times in a day. It does not require constant monitoring of the market for a number of days or weeks to decide whether they want to exercise their option buying or selling assets. In traditional options the rewards is potentially higher but take considerably longer. You can lose more than you have invested because profit or loss depends on the swing in the movement.
Binary options vs Traditional options, which one is preferred by investors? In Binary options, you cannot lose more than you have invested. Furthermore you can get a refund of up to 15% of your investment amount, even if a forecast finishes out of the money. The reward for limited risks when the forecast finishes in the money is less than that offered by traditional option. It ranges from 0 – infinity. Although traditional options magnify the rewards, it involves higher risks. Hopefully, these comparisons between Binary Options and Traditional options will help you understand how Binary option works.
Trading commodities online is not easy. Don’t let anyone tell you otherwise. It’s easy to lose money and much harder to make it. However there are a number of things you can do to give yourself a greater chance of winning-learn how to trade online.
The following tips are essential if you want to register positive results when trading online.
1. Pick one Commodity
It’s easy to open positions in lots of things. Look at that glittering gold; anyone for pork bellies; surely there’s value in corn; oil’s going up; copper’s going down.
We say start simple. Pick one commodity. Look at its history. Form your view on where it’s heading and start trading it. Get to know its quirks. How volatile is it? What level of gapping can occur?
Commodities are highly volatile. Because of this, managing your downside is actually your primary task. So, define what your maximum acceptable loss is within your given trading cycle and never let your open position exposure approach that level.
3. When Trading Online, Play within yourself
Financial spread betting is a leveraged way of trading the markets. Always trade well within your trading resources particularly at the beginning of a new cycle.
4. Gradual build-up
You want to target a profit of €10,000 on trading oil and oil is at $75 a barrel. You think it’s going to fall back to $65 in coming weeks or months. You could put on €10 shorting at $75 and when it hits $65 you’re 10k up. Don’t.
Set a specific profit target for your cycle. Don’t be vague. A trader can fall into the trap of thinking it’s an easy game, loading up a large bet and suddenly the market turns and they’re back where they started. If you hit your target, close your positions, take a break and ponder what you want to do in your next online trading period.
6. Side of the mountain
If you’re a newer trader, it’s probably better for you to take decent profits as you head for your final goal. Trading commodities like oil can fluctuate wildly. It’s like climbing a mountain…..you establish camps / benchmarks all the way up to the top. You don’t want to fall down 1,000 feet crevices too often. It takes the stuffing out of you. Better to bank profits as you climb upwards.
7. Don’t overtrade
Newer online traders can spend all day looking at their positions, tweaking orders and fretting about ups and downs. Don’t. Markets go up and down….surprise, surprise. Set out your stall, use buy or sell orders to capitalize on favorable movements and let your view take its course.
8. Longer view
It’s very hard to beat the market in the short-term. The market and the professionals who trade it are always 20 steps ahead of you. You may think news is news. By the time you see it, it’s probably old news. If you take a weekly / monthly / quarterly view, you have a much better chance of winning.
9. Right or wrong
Always admit to the possibility that your view is wrong and cut your loss accordingly if necessary.
10. If greed or fear enters your thinking, do nothing and go back to your first principles for guidance.
There are four asset classes, those are : commodities, stocks, indices and currencies. Currencies is sometime referred to as Forex. Binary options are normally traded under these options.
Stock : It is nothing but a share of the company, which is registered in the stock exchange through a regulatory body. Prices of these stocks may go up or down. There are number of factors which control the price of the stock. Price increase means increasing the value of the stock. The stock is purchased through a broker. Broker is the mediator, who is registered with the governing body and plays a vital role between the stock of the company and the buyer or the seller. There are various stock exchanges in the world. The same stock can be registered at more than two stock exchanges, however the government do maintain various rules and regulations so that a broker or buyer does not make profits between two or more exchanges by selling at one place at higher price and buying it at lower price. Stocks under binary option is that you have the right to buy or to sell by paying a premium amount.
Commodities : It is nothing but a item that we buy from a grocery store or from a super market or oil / gas we consume in our daily needs. If a person knows about the pricing of a particular commodity, its factors when it moves up or moves down, it can really make money through commodity market under binary options without investing much money in it. In the binary option, you do not need to buy the commodity and store it in actual, only buying an option to buy or sell the commodity gives you the right to exercise the same if the event happens or do not exercise the right if the event does not happen. All of this just required you to pay a very nominal amount of premium as a price for a right to buy or sell the commodity. If your expectations proves to be correct, then, you gain, otherwise you only lose a premium amount which is very nominal as compare to buying a commodity and storing it unless it is sold.
Indices : It means trading on the value of index itself, Index value is nothing but value of all assets traded on the exchange at a given point of time. One can expect index value for a particular time and if the value of all assets traded in the market proves to be that value or greater than that, a person will gain on the value over and above the expected value.
Currencies : Trading of currencies is nothing but trading of foreign exchange. There are major currencies also and minor currencies also, Under binary options, mainly major currencies are being traded. These currencies are traded with each other in the global market. It is explained as, one may want to buy some goods in other country and the other also want to buy goods in the one’s country, so they exchange currency with each other without purchasing each other’s currency.