/Lydia Wanjiru/ -- A binary option is a financial option that is considered to be an asset-or-nothing option, because the payoff is either you get a fixed amount of compensation or nothing at all when the option expires. It is also referred to as all-or-nothing or fixed-return options (FROs) and provides access to commodities and foreign exchange, indices, and stocks. Binary options are based on a Yes or a No proposition about whether an underlying asset will be above or below a certain price at a certain time. If the trader believes that the asset price will be below a certain price, he sells the option and if he believes it will be above a certain price he buys the option. Here are 4 steps to help you in binary options trading:
1. Choose the right broker
You need to choose the right and legitimate broker to trade with. New binary options brokerage firms are being started every year and so it’s important to do sufficient research on the broker that you opt for. You also need to learn the basic fundamentals and proper trading strategy to be successful in binary options trading.
2. Register and deposit money with your chosen trading platform
Read the terms and conditions of the trading platform you have chosen and deposit the minimum amount of money you require to start trading. Binary options are the best way to make profits even with very little initial investment. The minimum deposit for some binary options trading platforms is only $ 1 -$10. The price of a binary is always below $100. Every option bet settles at $100 or $0 and if the bet is correct it is $100 and $0 if it’s not. Make your prediction on the movement of the price of the asset that is if the price will rise or fall. If you predict the price of the asset to rise choose Call and if your prediction is that the price will fall, select Put.
3. Select the asset to trade
It’s imperative to select a trading asset in every trade, the expiration time, the amount of money you want to invest and the predictions that you will be making. Trading platforms have up to 180 different assets such as currencies pairs, indices, commodities, and stocks you can choose to trade in either. The choice is between 4 categories of assets but the decision is yours. If you are a beginner, try low-risk trades with good bonuses. Basic tools that come in handy in choosing the right assets are market reports, charts, and economic calendars.
4. Close the trade
When the trading closes after the set time, for example after 90 seconds, if it is a 90 seconds investment and you have made the correct prediction, then you win. If an investment is $100 and the payout is 90%, then it means that you will have made $90 in 90 seconds. Traders have an option to close early if it becomes clear that the trade is moving in the opposite direction before expiry.