What Are Binary Options Trading? - Binary Options Explained With Example.Binary Options trading are
known for their simplicity and all-or-nothing nature. Moreover, a few reasons are behind to give this trading type name binary option. Options are derivative instruments. It can be traded as forex pairs, cryptos, stocks, indices, commodities, etc.
Furthermore, for traders, it is a lucrative trading type because of it’s quick and high return percentage. But, according to the research, binary traders should pay close attention to the rules of trading before diving with real money.
So, consider this article as a guideline for beginners and hence, we will keep it as simple as possible. Let us start with the binary definition first.
What Is Binary Options Trading?
Abe Cofnas is a thought leader and analyst in the financial industry. We took a line from his book to explain the actual meaning of binary.
“The binary option is called binary because it fits the condition of being either right or wrong-all or nothing.”
On the other hand, the exotic option allows a trader to speculate on the price movements of various instruments. To trade binary option, you don’t need to purchase an underlying asset.
You rather predict whether the price will increase above, or decrease below the strike price or purchase rate. The strike price is the price, at which traders trade underlying assets. Market price must increase or decrease, by the time the trade expires.
The expiry period for binary options is very diverse. The time frame starts from 30 seconds and lasts up to a year. After prediction the price, you will select the call or put option, depending on the asset price movement.
If you guess accurately, you win a payout. But the wrong prediction will give you nothing. It is required to mention that the payout rate differs from asset to asset and broker to broker.Speaking of assets, there are
multiple trading instruments that you can trade as binary options. Before selecting any pair, find some strategies and rules on how to trade binary options
We will explain all the terms and facts of the binary option below that will give you more knowledge to understand.