Binary option trading or binary trading is a financial term in which the payoff is a fixed amount of a particular asset or just nothing at all. It is also known as a method of investment in the stock market. There are two major types of this option; first one is known as cash or nothing option and the second one is called asset or nothing option. In cash or nothing option, some cash is paid to the investor if option expires, and in asset or nothing option, value of underlying security is paid to the investor.
Options in tools for trading binary options are binary in the nature because they have only 2 possible outcomes. These options are also known as “all or nothing option, fixed return options and the digital options”. Before buying any option, potential return that it offers is known. For purchasing these options an investor can use put/down or call/up options. These options are bought against a fixed binary time such as, sixty minutes or weeks and months. It should be kept in mind that once an investor has bought a binary option, he can’t sell it before the expiry.
Process of Binary Option Trading
For binary option trading, the first step is to choose an asset. This asset can be a commodity, stock exchange or an index. Once you have selected an asset, the next step is to choose a time frame for prediction and it can be anything such as days, weeks, months or even hours. Then direction is selected, if the trader chooses up direction and the value goes in up direction then trader will get profit. Similarly, if the trader chooses down direction and value of asset drops, again trader will get profit but if trader chooses up direction and the value drops then in this case the trader will experience loss. So, binary trading is totally dependent on the prediction of the trader.
Benefits of Binary trading options
Although, there are always many risks associated while dealing with the financial market, the binary option trading has controlled risk. In this business, investor, upfront, knows loss and profit and this helps him make strategies about investing money. Another advantage of this trading is that the time frame is small. The techniques of business are very easy to learn and besides this it is the business where finance meets technology. Anyone who has an internet connection and computer can do this business right from his/her house.