Binary options are financial instruments with two possible outcomes. Your option either ends in the money or it does not. If it does. You get a good return on your investment. If it does not end in the money you loose the money you invested. You can never loose more than what you paid for the binary option.
Each binary options is based on underlying financial instruments. These instruments can be stocks, currency pairs, indexes or commodities. Whether or not a binary option ends in the money or not depends on how the underlying financial instrument develops during the maturity of the binary option.
How successfully you are going to be when trading with binary options is in other words dependent on how well you can predict the movement of other financial instruments. If you can correctly predict how a financial instrument is going to move you can earn a lot of money on small movements by investing in binary options.
Binary options are known under a number of different names including digital options and all or nothing options.
Are Binary Options Scams?
No. Binary options are not a scam. They do however have a somewhat undeserved bad reputation. This bad reputation and the idea that Binary options are a scam comes from people that have started trading Binary options without understanding how they work and the risk associated with trading with them. Investors that just looked at the money they could earn, not the risks. It is very important to understand that binary options are high risk investments. Investments that either give a high return or make you loose your entire investment. Their is no middle ground. This is why it is called a binary option. There are two possible outcomes, a binary outcome. You win or lose big.
Binary options are completely legal within all of the European Union. The trade is regulated to prevent scams.
Is the trade regulated?
Yes. Binary Option Brokers have a license that allows them to trade with binary options. Most brokers have a license from Cyprus or Malta. Cyprus is the absolutely most common regulation. In Cyprus Binary option licenses are regulated by CYSEK. Cyprus was the first country to create a regulation for binary options. Cyprus is a part of the European Union. A Broker that is licensed in Cyprus can therefore legally operate within the entire European Union Including the UK without needing any other licenses. A broker does not need a UK License if they have a Cypriotic license.
How to trade with Binary Options
If you want to trade with binary options you need to register an account with a broker of binary options. There are a large number of different brokers to chose between. Which broker you should choose depends on what type of binary options you want to trad with. Every broker have a different selection of binary options. Some brokers focuses on currency pairs, while other focuses on commodities or stocks. Look at the selection of binary options to make sure that the broker you are considering allow you to trade with the instruments you want to trade with. Some brokers are targeting people who have a large amount of money to invest. Other brokers are more friendly towards investors with less money to invest.
It can be hard to know which brokers that is the best options for you. Luckily there is a number of different websites available online that review brokers and help you help you find the right one for you. You can trade binary options here and read more about strategies.
Many brokers awards you a bonus when you register and deposit money to your account. The size of these bonuses can vary greatly. It is often possible to contact an account manager and negotiate a better bonus than the one the binary options broker features on their website. The more money you want to deposit the higher bonus you can negotiate for yourself. Never start trading before you have the bonus in your account. Once you start trading the bonus amount can no longer be adjusted.
Once you have registered an account you can log in to start trading. Different brokers use different platforms. All of them make it easy to invest. All you have to do is to navigate to the binary options you want to invest in, enter the amount you want to invest, and click buy or sell (depending on the type of option you want to buy). Once you have purchased an option there is no going back. You are committed to your decision until the option matures. Hopefully in the money.
Some broker allow you to close you positions early by selling your options. How much money you get when you sell your options depends on how the underlying instrument have developed since you purchased the binary option. In some cases you can make a small profit, in other case you will take a loss by closing your position early. This might still be preferable if you think the option is going to close outside the money. Loosing a part of the investment is better then loosing the entire investment.
Making Money With Binary Options
There are a lot of different ways of making money with binary options. What method is the best depends on what type of binary options you want to trade with. A technique that works well when trading in commodity based binary options might not work to well when trading stock based binary options. You will therefore have to create a strategy that is suitable for the type of trading you prefer to do. An example of a strategy that can be very profitable is swing trading using super short stock based binary options. By letting part of your profits ride you can earn a lot of money in a short amount of time.
Different types of Binary Options
Different brokers offer different types of binary options. There are a lot of different types of binary options available and brokers are constantly thinking up new types. Some of the most common types of binary options include:
- Classical binary options:
This is the original binary option. The object is to predict whether the underlying financial instrument will go up or down in value.
- Short or super short binary options:
These works as regular binary options but has a lot shorter maturity. The maturity can be anything from 10 to 60 seconds.
- Over/ Under binary options:
If you buy this type of binary option you are predicting that the value of the underlying instrument will be over or under a certain value at a predetermined time in the future.
- Interval or span binary option:
If you buy this type of binary options you are predicting that the value of an instrument will be in or outside a certain span when the option mature.
- One touch binary option:
If you trade this type of binary options you are predicting that the value of the underlying instrument will reach a certain point at least once during the maturity of the option. The value does not need to be reached when the option mature. It is enough that it is reached once,
- Option Builder:
Some brokers offers an option builder that allows you create your own options.