Binary options trading is slowly getting popular among people who want to earn more. If you’re thinking about getting in on the game, here are a few things you need to know.
In coding, binary means that a value is either 1 or 0. In trading, the concept isn’t that far off. You either gain or lose money based on a “yes” or “no” proposition. If the proposition is true, i.e. if the answer is “yes”, then you earn money. If it is false, i.e. if the answer is “no”, then you lose money. Based on your earnings and the initial price you pay, you can determine how much you actually gain or lose.
Binary Options Trading
To give you a clearer idea of how binary options trading works, here is an example:
The proposition is this: “Will the price of gold be higher than $1,000 at midnight?” If you believe that the price will increase, you can buy the binary option. Otherwise, you sell it.
For this example, let’s say that you buy the binary option. Let’s put your initial offer (or the price you pay to buy the binary option) at $40. If the price of gold exceeds $1,000 at midnight, you get $100 and earn $60. If the price of gold doesn’t exceed $1,000 at midnight, you earn $0 and lose $40, which is your initial offer.
Now, let’s consider selling the binary option. If you don’t believe that the price of gold will exceed $1000 at midnight, you can sell the binary option at, say, an initial bid of $37. (The initial bid is typically lower than the initial offer. In other words, you risk more money if you buy than if you sell.) When midnight comes and the price of gold doesn’t exceed $1,000, you get $100 and earn $63. On the contrary, you earn $0 and lose $37, which is your initial bid.
Binary Options Trading Tips
If you want to try your luck at binary trading, here are some binary options trading tips to help you get started:
1. Don’t put all your money in binary trading.
Binary options trading can be exciting, especially for a beginner. But with any type of trading, binary options come with risks that you should take into consideration when putting in money. After all, you don’t want to drain your savings, right? So before you start trading, decide on how much of your money you’re willing to lose just in case the worst happens. Once you start earning, you can make your “trading money pool” bigger.
2. Being wise is better than being quick.
Because binary options trading is time-sensitive, you may feel pressured to bid as soon as you can. However, it is important to stay smart about the bids you enter. Prioritize “wise trading” over “quick trading” so you have a higher chance of earning money.
3. Keep your emotions in check.
Yes, binary options trading is exciting, especially when you start winning. But don’t let your emotions get the best of you. Know when to step out of the game before you start losing big money.