WHAT ARE BINARY OPTIONS?
Before starting to trade, let's clarify what binary options are. A binary option is a bet for the movement of the price for a certain asset based on the suggestion of whether the price for a certain asset will fall or rise for a specified amount with the expiration of this bet. The answer in this situation has only two variants: yes or no. The main goal of the trader is to make an accurate forecast for this movement. Then, there can be two variants for the development of events: the loss of money (if the forecast turned out to be incorrect) or payment (if the forecast was successful). That’s why these options are called binary.
TYPES OF BINARY OPTIONS
With the development of binary options, new trading formats or variations of existing ones appear. Here are the main types of binary options. You can find them on most trading platforms.
Cash-or-nothing. The trader makes a bet on a decrease or increase in the price for a certain asset. The sum of the price and its change doesn’t matter. Investor needs to make an assumption whether the price will be above or below a certain level. If the trader guesses right, he wins from 70% to 90%. If he fails, he loses everything.
Assets-or-nothing. Unlike the previous case, the payout for the winning is defined by the price of the asset.
One-touch. The option expires when the asset’s amount reaches a certain value.
No touch. This is the opposite situation. The main goal of traders is to avoid the price touching a certain level.
60 Seconds. This quick transaction allows the trader to make money in a short timespans before the trend reversal.
Types of assets
Forex. Forex is the abbreviation of the foreign exchange. Currencies are traded in pairs, their relationship to each other is taken into account. The currency pair looks like two abbreviations. Trading in currency pairs occurs through the interaction of the international Forex market and binary options.
Index. An index is a trading indicator that consists of a set of specific stocks. The price of the index is defined by the average value of all stocks of the companies included in the index. Indices are very convenient, as they are constantly and extensively described in financial news.
Stocks. Stock trading means that you buy an electronic contract for the shares of a certain company, and, moreover, the purchase will be less expensive than the purchase of the share itself. Trading stocks through binary options suits those speculators who don’t want to invest their money in securities for the sake of 5-20% per year. In addition, if the value of shares falls on the market, then their holders will begin to suffer losses. If you use binary options on stocks, then you can make money on the fall of the market rate.
CFD. CFD (Contract for Difference) is a contract concluded for the difference between the prices of the equity at the time of the opening and closure of the agreement. Upon completion of the contract, one party undertakes to transfer the difference between the prices to the other party.
Commodities. The commodity is the natural resource that is supplied and available for trading. The most popular commodities are precious metals.