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Trading Binary Options

There are a number of different things that you can trade; the underlying assets range from currency pairs, to commodities, to both domestic and foreign stocks and indices. You can usually find all of the world’s most commonly traded assets as binary options, and you can access all of these without having to change brokers or websites which adds an extra layer of convenience to your trading routine.

There is an important feature that needs to be understood. When you trade binary options, you are trading underlying assets, and not the assets themselves. They are called underlying assets because you are merely trying to predict price movement and there is no change of ownership taking place, regardless of the timeframe that you select. This encourages smaller traders to take part in binary options because you don’t have to buy entire shares of an expensive stock in order to take advantage of the price movement.

There are a number of different online brokers where you can begin trading binary options. Because of the fact that there are so many choices out there for prospective traders to choose from, competition between brokers has begun to intensify. For traders, this is a very good thing as it encourages more types of options and the assets behind them, better rates of return, and increasing numbers of timeframes to choose from.

If you’re looking for a broker, going with one of the more reputable choices will be greatly to your benefit. Nadex (www.nadex.com) is a good choice as this is a federally regulated broker within the U.S. However, while this broker is quite reliable as far as your safety goes, they do not have as many options as some other brokers do.

24Option (www.24option.com) is another reliable broker, although not U.S. regulated. This broker offers one of the widest arrays of options of any broker. They have 60 second, two minute, and five minute options for the short term trader, and options that expire at the end of the week and the month for those looking for longer term trades—definitely a strong selling point.

There are three main types of binary option. The first is the call/put. With these, you are given a starting price (usually the current price, but not always with some brokers) and you need to determine whether you think the price will be above or below that mark at the end of the expiration time. Call options are used when you think the price will go up, puts are for when you believe the price will go down. They are the most simplistic version of all options and are the most widely traded option at this point in time.

The One Touch option is next. With these, a price is stated by the broker, usually a good distance away from the current price. Your job with these is to predict whether the asset in question’s price will reach the stated level. If it does this at any point during the life of the trade, your option is considered to be profitable. There are also high yield versions of this that can return up to 350 percent depending upon the broker. These have One Touch prices that are further away from the starting point than normal.

Boundary trades are also quite popular. A range of prices is given, and you are to determine whether the final price will fall inside or outside of this range. High yield variations of these also are out there, but you can only predict outside the range since it would be too easy to pick an inside option, especially if the broker is giving you a high yield return.

Options range in time from 60 seconds to one month. Finding the option that best suits your needs as a trader is easier now than ever before thanks to the broad diversity of brokers out there, and this competition has made even the biggest and best brokers offer better deals to clients and prospective clients alike.

Risk Disclaimer