Last Updated on November 17, 2022 by
Investing in binary options is certainly one of the ways to increase your capital and obtain concrete gains in a short time, or rather, in a very short time if we consider other types of investments.
Through binary options it is possible to earn from 70% up to 96% of the invested capital, all this in a very short time. Binary options have an expiry, a parameter that the trader chooses, which varies from 60 seconds up to 24 hours, therefore, the percentages mentioned can be reached quickly. It is, therefore, no mystery that everyone wants to make money with binary options.
There are two main reasons for trading binary options. The first concerns risk control, which is limited since the maximum loss is, in any case, limited to the invested capital only. The second reason is related to volatility and price changes. How?
Let’s assume that we are a day trader on indices used to always close all positions at the end of the day. If the market has little volatility and moves in a range of only 20 points, for example, it is very difficult to produce intraday profits; binary options help us remedy the low volatility. With binary trading, on the other hand, you can trade in a market that has the index as its underlying, but which generates an excursion of 100 points and not 20. Even with low volatility.
Simple Derivatives
Binary options are small derivatives that work in a simple way: they have only two outcomes: either all or nothing. This type of option is suitable for its simplicity and clarity to inexperienced investors. However, both financial institutions and fiduciary hedge funds and other operators use binary options to better manage part of their investment portfolios thanks to the characteristic of allowing financial operators to balance their financial commitment on the basis of market risks, which in the case of options binary is limited to the cost of the option.
Binary options are often traded by experienced traders, investors, and speculators who are willing to take some limited risk to make a good profit in a short time. If the trader knows the market and the probable direction of him, he will take a position with a binary option that will allow him to gain on the direction that the market will take. Those who are convinced of the direction of the market and intend to use their intuition to make a small gain in the short term can use binary options.
Can binary options trading make you rich?
Done correctly, yes it can. These are not potentially profitable binary options; this is proven by numerous millionaires. To get there, however, you will need the right broker, an effective strategy and you will need to invest in your trading training, using the resources described above.
Types of options
There are some types of options to choose from. The most popular types are listed in the short glossary below.
- Up/Down (High/Low) – The simplest and most prevalent binary option. Will the price be higher or lower than the current price when the time of expiry comes?
- In/Out (range or boundary) – A “high” and “low” value will be set. You are then determining whether the price will end up inside or outside these limits.
- Touch/No Touch – Levels higher or lower than the current price will be set. Then enter a position to determine if the price will “touch” these levels between the time of the trade and the expiration. Payment will take place as soon as the touch takes place.
- Scale – These are similar to up/down operations. However, instead of using the current price, the scale will have predetermined levels that are staggered up or down. These normally require a substantial change in prices. The downside is that returns will often exceed 100%. While it’s worth noting, both sides of a trade aren’t always available.
Expiry times
Another important component of binary options is the expiry times. This is when the trade will end and the point that fixes whether you have won or lost. These times can range from 30 seconds and 1 minute (turbo) to a full day (end of day) and even a full year.
As an intraday trader, however, you will be more interested in trading 5 and 30 minute binary options. However, opt for binaries with a 1 minute expiration and you have the ability to make a large number of trades in a single day.
Is binary options trading legal?
Despite the somewhat negative reputation, the reality is that binary options are legal. Most companies operate fairly. Opinions have been divided because there are some that operate scams.
Regulation in some regions has resulted in the withdrawal of the tracks from the retail market. In the EU for example. But professional traders can still use them. In regions like India and Australia, binary is legal, but traders should make sure they use a reputable broker and read our section below on how to avoid scams.
Can you use binary options on cryptocurrency?
Yes. All major Forex binary option brokers offer cryptocurrency binaries including Bitcoin, Ethereum, and Litecoin. As a derivative, traders will not “own” any cryptocurrency, they will simply speculate on the price. This means, however, that you don’t need a Crypto wallet or crypto account.
Scams and frauds
Binary reputation suffered from dishonest marketing and cybercrime. Too many unregulated brokers promise fast cash while operating fraud. The regulators are on the case and this concern should soon be eased. Binary itself is perfectly legitimate, but avoid instant money promises, cold calling brokers, and celebrity endorsements, plus any claims that you can start trading binary options for free. So, it’s not a question of good or bad, it’s simply a matter of being alert to the dangers and knowing what to look for. If you are unsure about a broker, ask the question in a live trading room to verify that it is properly regulated.
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