IntroductionThere are multiple ways through which a user can make money in binary options trading. To start with, when a binary option broker allows the early closure of any option trade, the overall value of the option tends to move along with the real value of the underlying asset. For instance, with a 'put' or 'down' option play, the value option of the contract appreciates as the market progresses below the target or strike price as well. Let us assume that you have decided to trade either any of Euro or dollar in anticipation of the price rising, and the pair's present price is 1.3000 and you believe that after something like one hour, either the Euro or USD will be higher than that level, it will be advisable to look at your trading platform and see if your broker's payout is close to about 75 percent, on a scale of one hour option contract with a target strike of 1.3000. You may finally decide to buy a 'call' or 'up' option and risk a 100 dollar premium after much deliberation. This can be likened to going 'long' on Euro or dollar on the spot forex market. Judging by the statistics above, the risk you actually take is limited to the premium paid on the chosen option. Note that you cannot lose in excess of your stake. Different from the spot forex trading, where loses can get bigger the more the trade goes against you, which necessitates the use of 'stop', the risk in binary options trading, which in reality is very limited significantly.
What are the payouts in binary options?Now that we have analyzed the mechanics of a simple binary trade option, it is pertinent for you to learn how payouts are calculated. In most cases, the payout will be valued according to the size of your capital at risk for each trade, regardless of whether you are 'in' or 'out' of the money as at when the trade is closed, the type of option trade you have chosen or even your broker's commission rate too. In our aforementioned example, we assumed that you place a 100 dollar bet that Euro/ USD will close over 1.3000 after the expiration of one hour and your broker offers a 79 percent payout rate. If based on this, your analyses is on spot and your trade ends up being in-the-money, you are going to get a payout of about one hundred and seventy nine dollars. This is computed from adding your initial investment of one hundred dollars to your seventy nine dollars, which is seventy nine percent of your initial investment of one hundred dollars. 100 dollars(initial investment) + seventy five percent of one hundreds dollars which equals seventh nine dollars will give a total of one hundred and seventy nine dollars in total.Quite easy, right? However, you ought to consider something else. You should be aware that there is not any generally applicable formula for calculating the payouts. Though there are a few other factors that may also affect the calculations.
Factors in payout calculations
Every broker has his or her own payout rate. For newbies, forex Ninja's intel reveals that most brokers offer anything between seventy to seventy five percent for some of the most basic option plays, while there are also those who offer as low as sixty five percent too. Numerous factors come into effect whenever you are determining this percentage payouts. Any underlying asset which is traded as well as the time before expiration are some of the significant factors to consider in the whole issue. Ideally, a market that is somewhat less volatile along with an expiration time that is longer commonly translates into a lower percentage payout. You also have to take into consideration the broker's commission too, in any payout statistics. After all, these people are providing a social service for you, the traders, to enable you to play out your ideas in the market and for that, they should be paid as well. In any case, the brokers' commissions do not vary widely from one to the other, but considering their number in play, their rates are expectedly very competitive as time goes on.
What happens when a binary trade is closed?
You ought to know by now that binary options are a kind of 'all or nothing' trading platforms since you either gain it all or lose it completely as well. This is because the payouts or loses are only given at the expiration of the contract, though a few of the brokers may allow you to close a binary option trade before the agreed expiration time. This of course depends on the type of option chosen, which is only available within a certain time frame such as five minutes after after an option trade opens up or until five minutes before any option expires. Trade on this flexible feature requires that brokers who allow early trade closure tend to have lower payouts. So, in essence, it is a sort of 'quid-pro-quo', which means that there is always a price to pay for everything, more so on this trading platform. Whenever you are trading with a binary option broker that allows the early closure of any option trade, the values tend to move along with that of the underlying asset. For example, with a 'put' or 'down' option play, the overall value of the option trade contract increases alongside the market in whatever direction it moves, especially when it is below the target or strike price. This implies that, though dependent on how far it has moved beyond the strike, the closing value of the option can still be more than the risk premium will pay, but hardly ever greater than the agreed maximum payout. Consequently, should the underlying market move higher, beyond the out-of-the-money, the value of the option contract will depreciate and the option buyer may return much less than the premium paid, if he or she closes early. Though, in both cases, the broker's commission is included into the payout of any option trade whenever it closes early.
This means that before you opt into trading binary options, ensure that you conduct an in-depth research and find out what your broker's payout rates are and any other conditions which maybe attached in the transaction. In a nutshell, you can make enormous profits from binary trading options and consistently too, smart traders do that regularly in assets ranging from gold to stocks and even down to currency pairs, but you just got to be very careful. The most important question to ask yourself is whether the enterprise is as simple as some brokers tend to portray it. They have this propensity to make out that all you got to do to make great profits is to create an account, but nothing is farther from the truth that this claim. Some may even advertise that you can turn out a profit of almost eighty percent in just mere minutes. Though that can be possible and probably happens quite often too, but there are always snags to how these things work. It is difficult to resist these ridiculous claims, especially when other forms of trade can offer only much lower rates. So, while you make money via online trading options, it will do well to have a realistic approach and perspective.
How does one make money through binary options trading?This is the crux of the matter at hand, or in other words, where the rubber hits the road: how you can profit from binary trading options. Before anything, know that you shouldn't expect to make a kill with just one trade, by this, we are talking about getting a system that will help you to get a reasonable return over a long period of time. A few tips are imperative here, if you must understand what is being discussed. The following tips can help you out:
(1). Learn how to read candlestick charts:
Most of the price activity you are bound to come across in binaries can be accurately predicted if you will care to study previous price fluctuations. This is simply what candlestick charts will reveal to you. These charts may at first seem complicated, but eventually, as you navigate through them repeatedly and consistently, they will become simpler.
(2). Study past price activity related to your chosen binary assets:
However one looks at it, trading binary options has little or nothing in common with conventional gambling. It is definitely not a roll of the dice and neither is it like flipping the coin, so to say. To substantiate this claim, any informed trader on this platform can utilize data and other information to select binary options that are most likely bound to expire in the money. Important data can be found in the asset's recent price activity. This contrasts markedly with traditional gambling.
(3). Watch keenly and follow recent pricing trends:
If the price of any asset has recently been rising, avoid the temptation to bet on any reversal of the trend. Similarly, if IBM shares, for instance, have cratered and continued to depreciate recently, don't assume otherwise. You should always bet along and with due recourse to recent market trends of assets and not against them, as doing that will only invite trouble for you in the long run.
(4). Never bet your mortgage payment:
Even if you are absolutely convinced that a certain binary option can't miss, do not bet any money budgeted for basic essentials. The risks and consequences associated with such betting decisions are enormous and best avoided no matter the hope and temptations. In some cases, betting tips even from the so-called experts maybe correct, but can do so outside the expiration of your trade. Do be conservative with any money for survival. Do be smart, for goodness sake.
(5). Gather some experience before you take any sizable risks with your money:
You should practice executing trades in demo accounts without actually committing your money at first. This is easier because many brokers offer several demo accounts to help you with this strategy. Use it. In this way, you are also likely to get used to the binary option platform hosted by your broker.
What are the ways you make money with binary options trading?
In binary trade, as we explained earlier, you can make money through the 'up' or 'down' options which are also referred to as the call or put options respectively. With these options, you are required to simply predict whether the price of the underlying asset will be either higher or lower when the option expires. There is also the one touch options, which are also nearly as simple as the option discussed before. In this option, you have only to predict whether the price of the asset will touch a certain price before the option expires. Most legit brokers prefer this option to all others. Thirdly, you can trade range options too. With these binaries, you are required to predict whether an asset's price will either stay within or move outside a certain range while your option still remains active or until it expires.
What types of people trade binary options?
The people who trade in binary options are broadly classified into three groups, with each group consisting of people with peculiar mindsets. The first group is where the strict gambler belongs. For the gambler kind of binary trader, he or she approaches binary options trading much like they will approach a roulette wheel, for instance. This category of traders do not give a heck what happens, and hence they are the great risk takers of all the groups on the platform. With them, everything is vested on chance. They don't look at any candlestick charts, they pay no attention to pivot points, and couldn't care less about Fibonacci retracements. In fact, they give no rat's ass what goes down anyways. The second category comprises of people who are real investors. They maintain a keen interest in all conceivable details. They mostly chase monumental returns advertised by binary option brokers. The last category is where you find the realistic traders. These folks are agreeably experienced and are well aware of all the risks involved in binary options trading. They are mostly the ones that make money consistently. To ensure that, they know that having a good grasp of all the assets that underlie the options and familiarity with certain aspects of the technical analysis give them a slight edge over other players, and with this edge, they know they can consistently make money. This is the group you would want to be identified with.
What are the advantages of trading binary options?
Trading binary options gives you a wide range of advantages over and above all other forms of trading. For one thing, the returns, if you are lucky, are simply astronomical, to say the least, though there are associated risks. Furthermore, with binary options trading, it is easy to get involved, quite unlike in other types of trading like forex trading. With binary options trading, you can easily open an account online and begin trading in just minutes after making your deposit. Binary options also expire quickly, which allows you to pursue additional trades, and your capital is certainly not held hostage by the option, but rather, is released to enable you make more money. You can get in and out of any given trade in just mere seconds, can you beat that? In summary, you can make money through binary options trading and lots of people are doing so, but you just got to be careful. That's all. You ought to be conversant with how the system works, know the risks involved and all the factors that play a role to enable you make consistent profits.
Wherever there is money to be made, scammers are definitely not far behind, and so you should be wary. They often try to lure unsuspecting people by way of promising them incredible returns in order to get them hooked. To prevent any hard luck stories afterwards, this article has dedicated time and effort to make you aware of all conceivable ways they are likely to present themselves to you. Really, people make money through binary options trading online, but the issues go much deeper than that. It involves a lot of research, hard work and careful followership for you to succeed in this enterprise.
Furthermore, we have inform you of the types of traders in binary options, which will certainly guide you in which category you should belong. The realistic traders is a group you must have in mind, since they are the ones known to make consistent gains regularly due to their experience and meticulous approach to matters of trading. No amount of care is too much before you invest your money, and for that reason, before you make any deposits, find out all that you can about any prospective broker. Check whether they are reputable and licenced, find out any mischievous history that may trail them from online reviews, keenly listen to them for any indications or signs of insincerity. This way, you will most likely prevent any misfortune from happening. If you work hard enough and remain very committed, you are most likely going to earn more than you have thought possible from online binary options trading.