In the global financial market, as in many other areas of commercial activity, there are often categories that seem to the uninitiated person very difficult to understand and use. For example, “binary options” sound like complex definitions of some processes that only professionals understand. But in fact, among financial assets and instruments, they are among the simplest of contracts. The task of a binary options trader is to determine the value of an asset over a specific period of time. Of course, this is the simplest definition of the category we are interested in, but it most accurately shows what binary options are in the modern financial market.
The truth is, there is one very important nuance that is preferred by the silent, both experienced brokers and traders, who often attract wealthy investors to finance their activities. But we will analyze this moment a bit later to create a complete picture of modern financial instruments – binary options.
The main types of binary options
The category in question appeared relatively recently, but due to the simplicity and high speed of the executed deals, binary options very quickly became popular. At the same time, the number of binary options trading platforms offering this service to traders increased at an unprecedented pace. What should a potential user know about binary options in order to earn money on this financial instrument?
Despite the general, rather simple structure of this tool, there are a lot of nuances connected with it that the future trader should know about. For example, fx options combine the ability to trade currency pairs with the concept of the options themselves. A trader chooses a currency pair, a tendency to change the course and after five minutes makes a profit!
Continuing this topic, it is necessary to distinguish the following types of options:
- Is classified according to the asset used: commodity, stock, contract, options on indices, etc.
- To buy or sell an asset (call / put option).
- Options that are divided depending on the urgency of the exercise (European, American and quasi-American).
- Also allocate a lot of rare transactions, using a variety of criteria for classification.
In other sources, brokers use the following types of options:
- The most common type of transactions – classic binary contracts. In this case, do not even need to know what an option is. The task of the trader is to correctly determine the direction of change in the price of a financial asset (up or down).
- The following type is known as “one touch”. The task of the trader is to determine whether the price of the asset reaches a certain level during the duration of the transaction.
- The “Ladder” type of binary options works according to the principle when it is necessary to determine which levels the price of an asset touches while the concluded contract is valid.
- “Spread” - the task of the trader to determine by how many points the price of the financial asset moves until the deal closes.
- “Range” - a participant in a financial transaction must state the extent to which the value of the asset will be / will change until the contract is closed.
What should a trader remember when trading binary options
Cooperating with brokers who offer binary options deals, you need to keep in mind the following things (Martingale system):
- It is necessary to closely monitor the market situation. Pay attention to all factors that are relevant to the asset you are interested in. When it comes to short-term loans, this should be done before the conclusion of contracts.
- News that is not directly related to an asset is often strongly reflected in its value. At the same time, in the short term, they tend to reduce prices, and in the long run - to increase them.
- Emotions (panic) and options trading – things are completely incompatible. Always remember, in this market there are often price hikes / falls. You should never be nervous, you should calmly wait and monitor the factors that affect the value of your assets.
- According to this strategy, after a negative result, you need to increase the rate not 2 times, but at least 2.1. Otherwise, you simply return the lost money.
- After the victory, for the further game of Martingale strategy it is necessary to start again with a minimum.
- Always analyze your mistakes. Even if it comes to small cash rates. Sometimes it helps to avoid large losses during large contracts.
When working with binary options brokers on your own betting system or on some new, unexplored strategy, never take risks, try (as far as possible) to mathematically calculate your every step.
Binary options – big cheat?
Most of the subjects of financial markets never even wonder what they are selling / buying, who benefits from it, where does the money come from to pay for this whole complex process?
And if, for example, with a currency (including cryptocurrency) is more or less clear, then with binary options everything is much more complicated. And this topic is not much discussed. Why? Unprofitable. Most binary options are classic bookmakers.
According to some data, only 10-15% of brokers work with 4 exchanges that provide access to the real market of this financial instrument.
And it is not a secret that at the end of 2018 most brokers and traders are aware of this. And readers, who did not know, can conclude that binary options are a divorce, a deception, a trick of money from honest traders! And here already "smells" of deception. Any schoolchild who knows mathematics well and has never heard of the above system will quite quickly guess how these binary options work. And in this matter do not blame anyone. You were satisfied with such a mechanism, you paid money, made deals, etc. And who did not arrange it, he would do crossword puzzles or play chess with friends for free.