Binary Options are a relatively new way of trading within the financial markets. Binary options basics are helpful to understand how they work. You do not need any binary trading for dummies pdf to understand it.

Beginners guide to binary options trading

This is a short and simple binary options tutorial.They are easy to understand.This is why they are growing fast.They are easy for the beginners.

what are binary options - the binary options basics

What are binary options?

They’re called ‘binary’ because there can be only two outcomes – win or lose. If your prediction is correct, you receive a payout that is determined at the start of the trade. If not, you just lose your initial stake.binary.com

Unlike the other sorts of trading, the Binary Options are different from them because:

  1. You do not become owner of any asset rather you attempt to predict the movement of just the underlying asset.
  2. In it you just bet or predict where an asset will be moving.

Being legalized in 2008 in the US, binary option has rapidly become one of the fastest and easiest methods to trade.

Binary Options are a kind of a “bet” where trader predicts the price movement of a basic asset for a particular amount in near future.



The Definition of Binary Options

The word Binary is used when something is composed of two or involves two. Simply it can be understood as an expression of yes/no, true/false or 0/1.

binary options definition

Thus ,in binary options, we can say there will be two outcomes. You can be right or you can be wrong. Here is no middle ground.

There are also two options available for the trader to chose: the price will rise (call) or fall (put)? The trader has to bet on any one option out of the two available.

If bet works in favour, trader will be earning a fixed amount.If not,the trader loses what he bet.

The amount you earn if you are right you know it before you trade.

Example of Binary Options Trade:

Let’s say ,the crude oil price is $90 at 2:00 pm.

You think it will close at $90 or above at 2:15 pm. In that case you buy (bet on) the “Call” option.Let’s say you “bet” $100.

The specific option tells you that gives 85% return, with expiration time at 2:15pm.

First case:Let’s say that at 2:15 the crude oil price is $91. You win $185.

Second case:Let’s say that at 2:15 the crude oil price is $88. You win nothing.

Here risk involved is clear where gross profit or loss of trader follows the principle of “all or none”.

In the first case you make a net profit of $185-$100=85.

In the second case you lose the $100 you placed on the option.

binary options example

Basic Terminology

PIP:

Percentage in Profit

Call Option:

This is an investment which is predicted for increase in value at the expiry time.

Put Option:

Reverse to a call option and is an investment which is predicted to decrease in value at the expiry time.

Expiry time

Expiry time is the time limit until which the prediction made by the trader will have to come true in order for the trader to win.

Strike Price:

Strike price is the price of an underlying asset at the time of purchase. As an option expires, it is compared to strike price for determining whether the closing price lost or gained the value.

 In the Money:

In other wors it means you won the trade.

Out of the Money:

It literally means that you have lost the trade.

At the money:

Its occurrence is very rare in the ever-changing world of financial markets. It is when any option equals the market price of an underlying asset at expiry time.

Once you learn the Binary Options Basics, you can know how to get advantages of it. In Binary Options there are loads of statistical analyses and many other elements which lead you to place either a put or a call option with trade. These options are related to the asset price movement.

Basic Types of Binary Options

There are many types of options in binary option trading but for a new trader these may be confusing. So here we are discussing some main types of binary options.

binary options basic types

High/Low

High/Low options are the most common and the simplest binary options. They can also be called Up/Down options, Over/Under options or even above/below options. This is the type I used above in the examples and the definition. Because they are easier to understand.

One Touch Binary Options

In one touch option, there is a target price, and the underlying asset price has to reach this only once for the trader to make money. This is very hard as the underlying asset has to hit the goal price and thus for one touch options you can see high payouts.

No Touch Options

These are one of the popular options for binary options trading. These are exactly opposite of One Touch Options. They are similar to traditional call or put options where you have just two set outcomes and you get fixed profit or loss.

Boundary Options

This offers two options to trader: The asset may expire inside the boundary or it may expire outside the boundary. There is certain range and if trader stays below this range it is called as inside the boundary and if he stays above the range it is called as outside the boundary.

What assets can be traded as binary options?

Almost anything can be traded as binary options. There are various different types of assets to trade as binary options:

Indices

They allow traders to trade on a set of stocks that are traded in major global markets. Ex: Dow Jones, Nikkei etc.assets to trade in binary options

Commodities

This is reliable and low risk way of investment. Ex: Gold, Oil, Silver.

Socks

It is similar to the classic stock trading. Many categories fall under it such as Technology (Apple, Google), Banking (JP Morgan) and many more.

Forex

It takes two major currencies and compares them with each other directly. Ex: USD, GBP, EUR etc.

 

Binary options beginners strategy

The easiest way is to find the best signal provider and trade with one of the best brokers.Visit my home page to find out what binary options signals and brokers are.

There are many binary options strategies for beginners but this is beyond the scope of my site.

Binary options tips for beginners

I have included tips for beginners in all over my site and inside my reviews.I think this is better than just making a list of beginner tips.

I have also a few articles with some tips on how to choose a broker,for example.

 

This is all about Binary Options Basics to understand it and start with. I have seen “binary options for dummies” pdfs and books. I do not think you need them.When you start trading you will understand completely.

 

Reference sites:

http://www.binaryoptionsu.com/binary-options-101/

http://economictimes.indiatimes.com/definition/binary-options

https://www.tradersasset.com/binary-options

http://www.binarytrading.org/assets

Photo credits:

https://bancdebinary.com/

https://www.24option.com

http://affordable-appliance.net/15-minute-binary-option-strategy-investopedia/