Forex, the trade of currencies, is a market that has evolved tremendously over the years and today, Forex Binary Options offer unconventional benefits to traders over pure Forex trading. However, in any scenario, it is extremely important to be as informed about Forex and binary options trading as possible.
What are Forex and Binary Options?
Binary options are part of the family known as ‘exotics’ and act as an amazing tool for risk reduction and profit maximization. As the name suggests, binary trading options have only two outcomes hence providing traders with an extremely valuable financial development. Like other common and conventional option, binary options also have a strike price, an expiration date and a premium for putting on the option position.
The simple concept of trading Forex binary options is that as the trader first choose an asset like a stock, pair of currencies or commodity and then you predict the direction of the investment; whether or not the asset will increase or decrease in value once the expiration date comes to pass. This prediction can be based on current market conditions and the general optimism in the industry for that asset. Once the expiry date of the asset comes to pass, if your prediction was correct and the investment did indeed move in that direction then you would have been ‘In The Money’ and you will gain the profits.
Because binary options are instant trading tools, their expiration date can be an hour, a few hours or a day or two. In case of an accurate prediction, the trader can make up to 72 to 75 percent of the original investment. However, the reason why binary options are so favorable is because even if the trader predicted incorrectly, the maximum that they can lose is the amount of the original investment and even in that case, they get to retain a small percentage of the amount as per the requirements of the broker.
For an average trader, this means that they can enjoy instant results and profits because the entire transaction is conducted over the internet. Therefore, you can control your binary options trading account just about anywhere from the world from any device that has an internet connection. When you trade in Forex binary options, you can enjoy extremely simple and easy-to-use trading software and reap instant benefits on low risks.
Fundamental Principles of Binary Options Trading
Binary trading options in assets like Forex, commodities and stocks is often referred to as Digital Options, All or Nothing Options and Fixed Return Options. Just like Forex trading, in binary options trading, there is no tangible financial tool that is being traded; the trading is actually done virtually over the internet.
While ‘In the Money’ is a successfully profitable investment, the one that is not is known as ‘Out of the Money’ binary options investment.
On the other hand, in case the price of the asset on the date of expiration is exactly as it was at the time of trading then the trader is ‘At the Money’. In this case, the trader is neither correct nor incorrect and the original amount of investment they put in the trade is returned to them.
After deciding the commodity to trade binary options in, when the trader predicts an increase in the price of the instrument, they are known to have traded in a ‘Call Option’. In such a case, the trader is entitled to profits even if the price increases by a tenth of a cent. Conversely, when the price is predicted to be decreased by the trader, then they are said to have traded in a Put Option and in the same way, even if the price decreased by a tenth of a cent, the trader benefits from the profits.
Selecting a Binary Trading Platform
There are certain features of online Forex and Binary options trading platforms that every prospective trader should be looking out for.
The first convenience that a trading platform can offer to you is that of a web-based experience because when your platform is online, you can access it no matter where you are. There are many Forex Binary Options trading software as well and it is pretty simple to download one on your computer. The only problem that traders face with trading software is that you can access them only from the computer on which the software has been downloaded.
Secondly, many binary trading platforms offer significant percentage of profits but one should always look for brokers that offer at least a 60 to 70 percent return on the investment. In fact, you can also find brokers with online binary platforms offering up to 75 percent return when your prediction on the asset turns out to be true.
Forex binary options trading platforms also offer the flexibility of trading multiple currencies and commodities at the same time. Therefore, you also need to look for platforms that can support the maximum number of Forex pairs – most importantly the major ones.
All safe and secure trading platforms need to have their encryption checked and each platform should have a leading market security provider. In fact, no matter where you access your trading account from, you should not have to worry about losing your binary options trading data and information. And this is a great site when you’re looking for more information about both Forex and Binary Options Trading.