Binary Options Trading: Another Way To Trade Forex
Binary options trading is a fairly new type of investment option being offered on the internet nowadays. With binary options trading, investors now have a choice of investing in a much-simpler and relatively less-riskier investment option.
With that said, some forex investors who have been badly burned with trading forex for a number of times are now looking at binary options trading as an alternative investment. With binary options trading, they can still use the basic knowledge that they have learned with their forex trading education and experience, but the factors of risk and complex forex price analysis has been significantly reduced.
What Is Binary Options Trading?
Binary options trading happens when a buyer enters into a contract to purchase an underlying asset at a fixed price at a pre-determined time in the future. The investor does not purchase the asset itself, rather the option to buy it. The fixed price at which the investor buys or sells at, is known as the strike price.
For forex investors who are familiar with trading currencies, binary options trading of currencies is a very simple option that they can try. Choosing to trade currencies in binary options trading is extremely simple. The investor just has to decide if the price of a particular currency would close higher or lower than its present price.
Why Is Binary Options Trading Less Risky Than Conventional Forex Trading?
In binary options trading, the potential gain or loss is already known at the onset of the contract. And it is determined by the amount put in by the investor. So, there are only two possible outcomes. Either the option expires in-the-money and the investors receives a 65-71% payout; or the option expires out-of-the-money and the investor receives nothing. However, there are new features for some binary options trading where the investor receives a 15% payback even if his option expires out-of-the-money.
So if you are trading currencies in binary options trading, it does not matter whether the price of the currency that you are trading move 1 pip or 100 pips at the end of the time period that you choose. What matters is that it went in the correct direction that you predicted. And the returns for your investment is fixed.
Binary Options Trading Is Easier To Understand
This type of trading provides a great way for inexperienced traders to beging trading. Traditionally, market trading has been done by those with deep understanding of finance and market movements. Conventional trading involves gaining or losing money on investments based on the amount of increase or decrease in the price of assets. In this new and intuitive type of trading, traders predict the direction of the market. Binary options trading also have a much shorter shelf-life than futures trading or stocks. Traders make predictions on the direction of the market within a day, and sometimes within an hour, or even in just 15 minutes. Gone are the days when a forex trader would have to monitor the forex market 24 hours a day just to guard if he makes a profit or not.
So you might want to give binary options trading a try. Open a demo account and prove to yourself how this extremely simple investment alternative can make enormous profits for you.
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Posted in Forex Tips