A binary option is In fact a prediction of which direction the price of the underlying asset a stock, commodity, index or currency will move by a specified expiration time.

With Binary Options, an investor doesn't purchase the asset - he is merely predicting the direction that the underlying asset moves.

There are actually just two possible outcomes. The only thing that is matter is whether the prediction is correct or incorrect. A binary options trade usably involved three steps:. First, you choose a trade expiration time, this is the time you want the trade to end. It could be any time period between a minute and a week - usably it is within the day. Second, you choose Call or Put. Now that the trade is placed, you simply wait for the outcome.

If the trade expires 'in the money', you make a profit. If it expires 'out of the money' , you'll lose. Now you can see where the "binary" comes from, it stresses the fact that there are two possible outcomes to a binary option, both of which are set and understood by the investor prior to placing a trade. Now here is an example:.

If you are correct you get a previously set percentage return on your investment e. A number of factors distinguish binary options from regular stock options. Typically the short-run expiration time suggests traders could make an immediate profit on the binary options and therefore are way more versatile in their option investments.

In regular stock options, a trader will pay per contract. Therefore the investor may profit or lose a sum based on the quantity of points difference between the expiration level and the strike price. In contrast to binary options in which the two outcomes are actually set from the beginning.

An investor in a binary option needs to hold onto his option until the expiry date. He must consequently take more care when ever buying his options as he is unable to sell them after they are purchased. Binary options are categorized as exotic options, however, inside financial markets they sometimes are termed as digital options.

While digital options are quite simple to understand and easily traded, the mathematics behind the pricing is complex. It is because of this that digital options are referred to as exotic options.

For years Binary Options were traded by large institutions and their clients in the over the counter market OTC. In , the Securities and Exchange Commission in the US approved the listing of binary options with continuous quotations and now binary options are also available to individual investors.

Most binary options strategy tracings nowadays are performed online thru private brokers that use sophisticated trading platforms. Related Articles: What Are Binary Options Developing Your Money Management Strategy Developing Successful Investment Strategies How to Spot Brokers that Scam How to Make Money Trading Binaries How Much Money You Need to Start Investing Advantages and Disadvantages of Binaries US Binary Options Brokers Tip for Success Developing a System How to Trade Binaries Free E-book Download Page How to Develop Successful Signals How to Find a Forum Demo Account to Practice Investing For our international visitors Sidebar: you are invited to visit our car insurance information section featuring a list of articles that may save you hundreds of dollars on your motor vehicles quotes.

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This article offers a concise introduction to this volatile market. Traders who want to start trading binary options often have difficulty determining which strategy is best. What may work well for a core strategy in the short term, may become counterproductive in the long term. Having said this, there are only two major reasons you should have a proper trading plan. Download your free How to trade binary options PDF.

Firstly, a trading plan protects against emotions interfering with trade decisions. In other words, it makes sure you are not influenced by your emotions when making trades as a beginner. In a nutshell, it works like a firewall. Once a decision is made and you enter the trade, you are protected by the plan. As long as you follow it consistently, it will protect you. Secondly, it gives you a chance to focus on fundamental analysis.

Fundamental analysis is what traders use to predict future prices based on a set of fundamental indicators. Fundamental analysis is important for those that want to be able to predict future prices, as it gives them a tool to make better trades. This is a method of trading that focuses on technical analysis.

Technical analysis relies on charts to see past patterns and trends. If a trader knows how to read these charts, they can tell whether the market is about to change direction.

There are several types of trading systems and fundamental analysis is one of them. However, there is no substitute for practice and experience in order to become successful at this method of trading. In essence, it means having a proven strategy that will help you make more informed decisions in the long run. So how do you know which trading system to go with, if binary options is the right one?

There are several things to consider, the first of all. A good strategy should be able to take into account both fundamental and technical indicators to give you a complete picture of how the market is behaving, and how the market will react. Also, it should be able to show you that trading system is better suited for you based on technical analysis alone. so you have more choices to make when trading as a beginner.

edu no longer supports Internet Explorer. To browse Academia. edu and the wider internet faster and more securely, please take a few seconds to upgrade your browser. May I suggest that prior to reading this book you make yourself familiar with the look and feel of a real life Binary Options trading platform, this will help you to better understand the guidelines and concepts described here.

You can simply register to an online broker, it is free and without any obligation on your part. Which broker? Log in with Facebook Log in with Google. Remember me on this computer. Enter the email address you signed up with and we'll email you a reset link. Need an account? Click here to sign up. Download Free DOCX. Download Free PDF. How to Trade Binary Options Successfully Part. Teh Jian Zhi. Continue Reading Download Free PDF.

How to Trade Binary Options Successfully — A Complete Guide to Binary Options Trading By Meir Liraz Contents 1. The Single Most Critical Factor to Binary Options Trading Success What are Binary Option The Flow of Decisions in a Binary Options Trade Advantages and Disadvantages of Binary Options Trading Binary Trading Risk Management The Single Most Critical Factor to Binary Options Trading Success May I suggest that prior to reading this book you make yourself familiar with the look and feel of a real life Binary Options trading platform, this will help you to better understand the guidelines and concepts described here.

htm , this is the broker that we trade at, we chose it based on an extensive research and find it to be one of the best out there. I suggest you first tour its features and flip through the training resources in its extensive education center and just then commence with reading this book.

Now, there is one critical issue regarding Binary Options that I want to address right at the beginning of this guide and that is broker scam. In my opinions, the single most critical factor to your Binary Options trading success is that you trade with a honest and reliable broker.

Because once you fall into the hands of a scamming broker, no matter how effective your strategies are, you are bound to lose all your money. Now, the word must be said — Binary Options are a legitimate and a viable financial instrument and most binary options brokers are honest and reliable. However, there are a few bad apples out there that give others a bad name. So how can you avoid falling prey to a scammer?

Here are some ideas to help you with this. For starter you can choose a broker from a list of safe brokers. The brokers on this list were checked and confirmed to be honest and trusted. What if you want to trade with a broker that is not on the safe list? Here is a sample strategy that will help you choose a good broker. Trade with small amounts of money, test the waters first, once everything feels OK and you are more confident with the broker, proceed with your planned amounts and strategy.

Now, how can you spot a scamming broker? In a typical scam the broker manipulate the movements of the underlying asset, usually upon the expiry time, in a way that the outcome will be in favor of the broker. During that time, if your trade was close, the stock move just enough for you to lose your money.

Since this particular broker features the Reuters logo on its site, one of the complaining investors has been spoken with Reuters who has informed him that they are looking at opening a case against the scamming broker as he is a risk of being fraudulent and is using the Reuters name to big himself up. I noticed that the website used to track my trades was having issues with the trades actually expiring 30 to 60 seconds after the time had run out to zero.

Then the site started slowing and freezing so that I could not see my trades, track anything, or see information regarding possible trades. Now you know what to look for and how to identify a broker that uses scam techniques. On a final note — there is one misconception about how binary options brokers make money that needs to be cleared. Well, this is not the case, an honest broker will derive his income from the difference between the total sum he pays to winning trades and the total sum that he gets from the losing trades.

Say, there are only 2 trades, same asset, same time, and same expiry time. You see, binary options brokers have a viable business model that is not dependent on the outcome of the trades.

What are Binary Option The purpose of this guide is to show you how to make money trading Binary Options. In the first several chapters we will deal with the in and outs of binary options while later on we will go into the strategies needed to achieve success in trading binaries. A binary option is in fact a prediction of which direction the price of the underlying asset a stock, commodity, index or currency will move by a specified expiration time. There are actually just two possible outcomes.

The only thing that is matter is whether the prediction is correct or incorrect. A binary options trade usably involved three steps: First, you choose a trade expiration time, this is the time you want the trade to end.

It could be any time period between a minute and a week — usably it is within a day. Second, you choose Call or Put. Now that the trade is placed, you simply wait for the outcome. A number of factors distinguish binary options from regular stock options. Typically the short-run expiration time suggests traders could make an immediate profit on the binary options and therefore are way move versatile in their option investments.

In regular stock options, a trader will pay per contract. Therefore the investor may profit or lose a sum based on the quantity of points difference between the expiration level and the strike price. In contrast to binary options in which the two outcomes are actually set from the beginning.

An investor in a binary option needs to hold onto his option until the expire date. He must consequently take more care whenever buying his options as he is unable to sell them after they are purchased. Binary options are categorized as exotic options, however, inside financial markets they sometimes are termed as digital options. While digital options are quite simple to understand and easily traded, the mathematics behind the pricing is complex.

It is because of this that digital options are referred to as exotic options. For years Binary Options were traded by large institutions and their clients in the over the counter market OTC. In , the Securities and Exchange Commission in the US approved the listing of binary options with continuous quotations and now binary options are also available to individual investors.

Most binary options tracings nowadays are performed online thru private brokers that use sophisticated trading platforms. The Flow of Decisions in a Binary Options Trade A Binary Options trade calls for several decisions to be taken by the investor. Deciding on the Underlying Asset The first decision is choosing an asset. Based on which broker you decide on, you will have a selection of assets from different financial markets.

Some trader elect to focus on one particular asset, or one market, while others trade several options simultaneously. One consideration as to what asset to trade has to do with the opening hours of the various world stock exchanges. Currencies are usably available for trade 24 hours a day.

Most brokers offers four classes of assets: Commodities — e. Stocks — e. Forex Currencies — e. Deciding On an Amount to Invest Binary options brokers allow for a low minimum so you can be flexible as to the amounts you can invest. The amounts you devote to trade should be dictated by your risk management plan more on this when we talk about risk management later on. Deciding On the Desired Time Frame Binary options are short term investment instruments by definition. The time frame available can run from one minute to a week, depending on the trading platform.

So, what time frame should you choose? You could think that you observe an emerging trend only to realize that it was only a brief manipulated move and that the trend is over once you enter the market. Therefore, I suggest you use at least a 15 minutes time frame. Following an analysis that we will discuss later on you come to the conclusion that Gold is currently trending up. Price barriers can be higher or lower than the current price of the underlying asset when the option is purchased. In a range option you can trade on the volatility of the asset.

Each option has a predetermined range and you must determine if the asset will be in the upper and lower range at the time of expiration. Note that both features require that you pay a flat fee upon implementing. Close Now — this features allows you to sell your option before the time of expiration. Extend Roll Over — allows you to extend the time of expiration in order to increase the odds of being in-the-money. Advantages and Disadvantages of Binary Options Trading Consider the following advantages and disadvantages when trading Binary Options: Advantages Risk control — With binary options the return on initial investment is fixed from the beginning, thus the amount of possible profit or loss is well known.

Because the rate of return is relatively high, and trade times are short, in the long run the fixed rate of a binary option can be a big advantage. Short-time trading daily, hourly — With binary options you decide what the expiry time of the option will be. However, most traders would prefer shorter time frames.

Low minimum amounts — Binary brokers have low investment minimums, thus allowing you to start with small amounts. If you are familiar with stock market trading, you probably know that you need a decent amount of preliminary investment capital, brokers, commissions, etc.

Note that both features require that you pay a flat fee upon implementing. Just start slow and if your strategy turns out to be tremendous, deposit more. Discover the easiest way to make money trading online. So you only have two possible ways to place a trade:. Click here to sign up. What covers the free trading PDF Introduction to binary options trading Binary options in a nutshell How to choose the right BO broker Trade for real money or on demo account?

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