As you mature, you may be one of those people simply longing for retirement, or one of those with a specific dread of it. Personal finances are sometimes an issue, and you may find that you are looking around for ways to supplement your income. One simple possibility is to trade price fluctuations in global markets, which is known as binary options. These are different from traditional investment opportunities, and they have risks as well as rewards. Here is a quick guide to what you need to know.
How binary options function
Fixed return or high-low options are the most common types of binary option. They are time limited with a fixed expiry time and date. By watching the markets over a period of time, you can reach a conclusion about whether prices are likely to rise or fall. If you predict a rise, this is known as a “call”. If you predict a fall, this is known as a “put”. You have the opportunity to specify a strike price (often the current price) and choose between call and put.
Placing a call
When the binary option expires, if you have correctly estimated the direction of the market and it has risen above the strike price, you will receive a fixed amount in return. If the market behaves differently to your prediction and is lower than the strike price, you will forfeit your investment.
Placing a put
When the binary option expires, if you have correctly estimated the direction of the market and it has dropped below the strike price, you will receive a fixed amount in return. If the market behaves differently to your prediction and is higher than the strike price, you will forfeit your investment.
Developing your strategies
One of the benefits of binary options is that the risk and reward levels are known at the outset. A key aspect of trading in this way is developing an appropriate strategy, and this is where professional advice can give you the edge, as otherwise you are relying on luck and, inevitably, increasing your level of risk. There are a number of companies offering trustworthy advice on binary option strategies. Some strategies require specific market conditions to be effective, and if they are used well, they can offer you a good return on your investment. Testing your strategies and your ability to choose binary options is best done using a risk-free demo account from a reputable broker.
Making a start
Finally, when checking out which trading brokers to use, remember that many will have a minimum deposit that you must make. A lower deposit is ideal if you are new to binary option trading and want to start relatively small, with minimal risk. Brokers also have a minimum trade requirement, and those offering a demo account will let you practice before you invest your funds. Also, it is worth looking out for bonus accounts; these are often offered to new traders.