What Is Binary Options Trading?
While Forex trading is probably the trendiest type of online trading right now, binary options trading is perhaps the
Types of Binary Options
Binary options come in two specific types:
Let’s look at an example of a binary option that is
You can trade binary options on many different types of financial instruments including stocks, commodities, currencies, and more. If you’re familiar with Forex, you can apply binary options trading to the currency market as well. Whereas with a standard FX trade, you simply buy or sell and try to close out at a positive value, you can also opt to do a binary options trade on a currency pair. When you do this, you bet that a currency will close at or above/below a certain strike price at a certain time. If it does, you receive a set payoff. If it doesn’t, you get nothing.
Benefits and Drawbacks of Binary Options Trading
You should be able to see from these examples why it might be advantageous or otherwise to trade binary options. Looking at our Forex example, what are the possibilities here? You could win a set amount of money, possibly a large set amount of money, from a small movement in the right direction; if you lose, all you lose is the amount you paid on the spread. The drawback here is that binary options often have a very high spread. That means that if you aren’t winning most of the time, you still can lose a lot of money fast. Should you trade binary options or not? That depends on your trading style and whether they appeal to you. As with other forms of trading, there is a certain amount of luck involved with all of your binary options trades — but there is also room to use skill and intuition to become profitable. Check out the rest of our articles on binary options trading to figure out if binary options trading may be right for you.