There are only two outcomes for the buyer of this type of option: a pre-determined profit or a loss of the amount traded, hence the name binary option. It is trading simplicity at its best: a bet in the direction of a market by the end of a specific short time frame.What are the best binary options brokersHow do you make money trading with a binary options brokerWhy would someone trade with thes best binary options brokersWhat asset classes to trade at the best binary options brokersWhat are the advantages in trading binary optionsAre there disadvantages in trading binary optionsHow much should I invest in binary optionsCan you provide a few examples of a binary option trades and the thinking behind themWhat time frame should I choose when trading with the best binary options brokersHow do I control risk when trading binary optionsHow do I find the best binary options brokersIs trading with the best binary options brokers regulated or overseen by government agenciesAre there particular strategies to consider when trading with the best binary options brokersIve heard that trading binary options is a form of gambling. Is itThe binary option pays out a fixed percentage, between 0 and 100, of the cost of the option at the time of expiration. A call binary option is purchased if the trader thinks the price of the underlying will increase. Similarly, a put binary option is purchased if the buyer believes the price of the underlying will go down. Call binaries are also termed up options. Likewise, put binaries are sometimes referred to as down options.Binary options are also called all-or-nothing options or fixed-return options (FROs). These names reflect some of the characteristics of binary options: The investor either makes a profit or loses the option investment. The magnitude of the potential profit is fixed and known by the option buyer at the outset of the trade. Binary options automatically exercise upon expiration and are cash settled. This means that, in most cases, the option holder does not have a choice to buy or sell the underlying instrument during or at the end of the options life.The binary option trader makes money when he makes a correct prediction about the price of the underlying asset at the time of the options expiration. The amount of profit per trade is controlled by the fixed-profit percentage offered by the broker. The amount of money that can be made is a function of the number of winning trades versus losing trades a trader makes coupled with the average profit percentage per trade. As you can imagine, the most money is made by traders who trade often, are correct in their predictions a high percentage of the time, and whose trades have a high fixed-rate payout. To get started with binary options the astute aspiring trader needs the following: An education on how this type of trading works, a sum of risk capital he can afford to lose, a developing education about the markets he intends to trade, the ability to partner up with a top-notch binary options broker, a well-developed trading plan, and a set of simulated trades that permit the aspiring trader to assess his potential for profit. These are examined in detail through the following set of questions and answers.Many people are attracted to binary options because they offer limited risk, a low cost of entry, multiple daily trading opportunities and the opportunity to make profits relatively quickly. Risk is limited because you only trade the amount you can afford, often as little as 1. You do not have to pay full price for the asset, only predict the direction that its price will move. Regarding the quick profit potential, binary option expirations range from 60 seconds to over 24 hours, giving the trader a relatively quick potential payoff. As you can imagine, a high frequency of many small profits can quickly add up to a large sum of money.Most brokers offer four different asset classes: Individual Stocks, Commodities, Currencies, and Indexes. Individual stocks would include well-known names such as Apple, Google, Coca Cola, and BP. Gold, silver, wheat, cotton and sugar are some of the commodities available for binary option trading. Binary options are available on most major currency pairs, such as GBP/USD, USD/CAD and EUR/GBP to name a few. Binaries can also be traded on indexes such as the DOW (U.S), SampP (U.S), and FTSE (U.K.) and many others.Many people who trade in binaries do so because this type of trading is very simple and straightforward. Essentially, all that the trader needs to do is predict whether the underlying will go up or go down in the specified timeframe. Also, relatively small amounts of capital are required, which makes this type of trading available for many. All that is required is a funded binary-options brokerage account, an Internet connection and a device such as a laptop, desktop or tablet to execute the trades. Additionally, binary options brokers do not charge a commission for the customer to make a trade, eliminating that particular cost to the trader. Finally, this type of trading is done 100 online. It can be done anywhere that there is Internet access.There are several main disadvantages associated with binary options trading. These include loss of capital, lack of tools, and lack of education. Because binary options have relatively short expiration periods, the trader receives very quick feedback about his predictions in the form of profits and losses. For a losing trader, the losses can quickly mount up, especially if the trader executes frequent and ill-planned transactions. Remember, if the traders prognosis is wrong, the outcome will be a loss of most of the traders capital. So, when trading binary options, be aware that although one can make high percentage returns over a short period of time, one can suffer large percentage losses over a short time frame as well. One of the keys in overcoming this disadvantage is for the trader to keep his bet size small. Other disadvantages revolve around knowledge and information availability.
