Binary Options may sound difficult to understand especially when you are a first time trader but once you get to learn about the basics, you can go your way through it. Binary Options is simply a kind of trading which lets you predict whether a value of a certain asset or commodity will either increase or decrease. That is the simplest way to explain how it works, yet like any other trading, it has its own repercussions and you should be able to fully understand it accordingly. This kind of trading is highly dependent in price fluctuations, so you need to know more about how financial and trading markets work. Binary Options are not the same with Traditional Options. It has differences in many aspects, including the payouts, risks, and the investment processes.
The most common option in binary trading would be the high and low option. In this trading you will have access to stocks, foreign exchange and commodities. It is also called a fixed return option. This means that the option would have an expiry date or time, which is called in the term of strike price. If a trader correctly predicts the movement at its strike price then the trader gets a fixed return regardless of how much the price has moved in the market. However, when the trader predicts incorrectly, then he would lose all his investments.
When a trader predicts that the market will increase in value, he or she would purchase the call option. When he or she believes otherwise, the put option shall be purchased. To be able to make money through the call option, the price must be above the strike price at its own expiry time. By purchasing the put option, you will make money if the price will be lower than the strike price at its expiry time. The strike price is the current price of that certain aspect or commodity. Therefore, the trader predicts the future movement of the price, whether it will increase or decrease in value. What is good with binary options compared with any other trading types is that there are lots of expiry dates or time in this trade. Some go for as quick as a minute, and some go for as long as a month.
Therefore, you need to choose time date or time that aligns with your prediction which is why you need to analyze it and not just make a good guess. Otherwise, you will lose your investment. That would be a big mistake especially when you have invested a huge amount of money because once you predict incorrectly, you are not going to get your investment back. It is also worth mentioning that you can invest with smaller amounts although this may vary depending on the broker you are signed up for. More often these brokers have minimum and maximum investment amounts so you should check on that. To learn more about Binary Options in the United Kingdom, visit Trading Binary for more details.