Binary Options – a modern financial instrument that gives a real opportunity to generate income in the financial markets. The principle of binary contracts is simplest and consists in the forecast of a course of the chosen asset price. Under an asset it is considered to be any goods, currency, raw materials or an index.
In simple terms, you can open the deal to increase the price of an asset, such as gold, or in its decrease. If at the time of expiry closing of the contract, the movement trend coincides with your prediction you will get profit. Otherwise – you will loss, as a rule, at a rate of 100% of the contract amount. That is, at first sight everything looks that you need to guess the price movement of an asset and get the fixed profit which leaves on average in binary options from 50 to 92%. However, the apparent simplicity and accessibility of functional binary options is hidden a huge reservoir of information, without which the possession, trade in binary options will not bring anything except disappointments and losses is hidden.
So, what actually is binary options?
The greatest attraction of this financial product is no spread, and that you do not need to wait long to earn, for example, in the case of bank deposits. The minimum period of the binary option validity is just 60 seconds. A lack of spread even allows you to make a minimum change in price of an asset.
Trade turbo options (60 seconds) resembles the scalping tactics in the classic Forex trading, but has a number of advantages, which, like all the other binary options benefits are reduced, in principle, to one thing – getting a fixed income or a fixed loss. The binary trader never goes into drawdown, the risk of losing a large part of the deposit. He risks of only the the purchased contract sum.
However, like in any business, trade binary options are fraught with a lot of pitfalls and dangers. That’s why it is necessary to know and be able and how learn to earn on binary options, this article will tell.
The main types of binary options
For a start we will be defined what binary options offer us for trade broker companies. The list is rather big and at different brokers may vary. Let’s speak about the most popular types of binary options.
Classic Binary Options is “all or nothing”. Up or down, put or call – all this that is required to be specified upon purchase of such option. One of the most common types of binary options, but, unfortunately, is not the most profitable.
Long-term options is in fact, the same as the classical binary options, but for a period of execution from 1 week to 6 months. The only advantage of this option is that it is ideal for trading using technical analysis knowledge in the area, as long-term forecasts are the most accurate and does not depend on the local trends.
“In one-contact” or the One touch is an option, a standard condition in which the profit is to overcome the trend of a specified price level within a set time period. The simplest example of such an option, it is, for example, predicts that within a week the price of a selected asset will reach a specified value. The main difference between option one touch of the classic option – the definition of commencement and completion the date of the transaction. The trader can only choose the period of the transaction opening, who is offered him his broker.
The option «No touch», as opposed to the one touch option where the price is expected to reach a specified level, means that for profit price of an asset should not break the boundary of a specified value. Yield on the touch options is very high, and can reach 600%. The minimum duration of such options is 1 day.
Options “60 seconds” or turbo option – open for 1 minute period and are one of the most popular options for a quick profit. In addition some binary brokers besides a minute option offers short term trading contracts which last 30 and 120 seconds.
Option ladder or the step option. Using a ladder option, the trader has the ability to establish multiple high / low levels, which the price should reach a selected asset before the due date of the contract expiration. The total profit is dependent on the distance from the level of the strike price (execution price). That is, the farther the level is set the higher the gain, in case the price reaches it.
Step option essentially repeats the principle of one touch option, but has the ability to establish multiple-strike levels. “Staircase” is considered one of the most profitable (up to 600% at the highest levels), but at the same time, one of the most difficult types of options.
Pair option works for comparison of the price pairs of chosen assets. In this case, the arithmetic mean of the quotations of the sum. In fact, it is forecast that the price of one of the assets will be higher or lower than the price of another asset for a dedicated period of time. Pair option is the most unpredictable for forecasting as the mutual behavior of two assets as practice shows, doesn’t give in to any analysis.
Range Option is the Principle of this option consists in receiving profit, in case of the correct forecast of hit of the price in the established corridor (in range) or out of limits of his borders (out range). Buying this kind of option, the trader has the opportunity to consider just 3 parameters:
– The price level at the present time;
– The upper limit of the price channel;
– lower border of the price channel.
How to begin trade in binary options
Everyone can start trading binary options. Even from scratch. If it is about zero or minimum investments. There are many brokers that offer binary options costing from $ 1, or even the ruble (actual for the Russian market), and sometimes even no deposit program. However, if you can start making money from scratch or minimum financial investments, to earn something with zero mark of knowledge you do not succeed. And no matter how many people tried promote the availability of binary to all and to everyone, to earn, trading in binary contracts it is possible only having armed at least with basic knowledge in the area of the technical and fundamental analysis, and also skilled trade on demonstration accounts.
So, here are some basic rules for starting a successful binary options trading:
- Obtaining basic knowledge in the area of fundamental and technical analysis;
- Choosing a reliable and convenient binary broker;
- Trading on a demo account and working out on its trading strategies, indicators, oscillators, etc.
Only after you learn how to successfully trade on a demo account with several brokers, you can proceed to real trading, starting with small amounts and gradually overcoming the psychological fears.
Binary Options Strategies and Their Application
Strategy of trade in binary options is to use set of knowledge of fundamental and technical analysis as well as technical and graphical indicators, oscillators and automated trading systems. There are a number of proven trading strategies, which under certain conditions can increase the level of profitability of the trader trading account. We list the most popular ones.
Trade with the trend is determine the direction of the trend length. If the trend is a long time in the same direction, with each peak reaching level is higher and higher and each recession at the same time is displayed on graphics above the previous level, so the price is likely to continue on the trend and you can open a deal.
Trading against the trend – is based on the anticipation of a reversal or rollback trend. In contrast, trade with the trend is more effective if there is no clearly defined trend.
Trade on the news is based on fundamental analysis, which allows you to skillfully use the information obtained from the upcoming release of the world’s economic news.
Martingale’s strategy. It Has in a basis the principle of multiplying the amount of each following one for the loss-making contracts for purchase or sale the same asset at a certain ratio. That means that the previous transaction was unprofitable, the amount should be increased by a factor of a new contract, in the case of a profit allowing cut off losses incurred by the previous contract.
But we do not try to grasp the immensity and list all the available option trading strategy, as their number constantly increases in proportion to the growing popularity of the options among traders all over the world.
Whatever it was, and no matter how attractive strategy wouldn’t seem, it is assumed that the best trader’s strategy – is his own because any ready strategy is not able to take into account all the nuances and specifics of the market, combined with the psychological characteristics separately taken trader.
Application of ATS in binary options trade
As in a case with application of trade strategy, use of automated trading systems, more simply robots, is not the ideal solution for a successful trade. ATS designed to sell at a time when the trader alone can not trade, because it is not able to do it day and night from a physical point of view. But the market does not forgive mistakes or negligence, so use of robots in the binary options may look like a misleading solution of the problem of total control over the trading platform and account. Here it is necessary to consider huge minus of robots that they always work on the set algorithm, and then less its flexibility and universality, that a high probability of made the mistake by the robot. That is why ATS often demand continuous tuning and control over themselves that considerably reduces efficiency of their use. Nevertheless, the use of a robot as part of a strategy quite useful and relevant. The main thing is not abuse and do not rely on the machine. After all, no matter how perfect it may seem, it’s just a machine.
Binary auctions: what is it?
Of course auctions exist. In their classical understanding and representation. But binary auctions have never existed. What is a binary auction? It is a binary option, mistakenly called “auction” due to the consonance of words, but also probably because the word “auction” is more popular and accessible to a broad understanding than purely economic application, the term “option”. However, in the near future, this linguistic error will surely disappear, thanks to the rapidly growing popularity of this high-yield financial instrument. After all, today the binary “auctions” market – the most fast-growing and prospective trading floor among the other financial markets. For a simple start large sums won’t be necessary for you, it will be enough a small deposit, but a great desire to grow in the area of trading and receive steady income which opens the door to a world of endless possibilities and financial independence.