Introduction to Trading Binary Options
The binary options industry is a relatively new financial market. The market was deregulated in 2008 to make it open and accessible to retail traders for which binary options trading is actually developed.
The main difference from all other forms of trading is that instead of profits being earned solely by the asset moving the trader’s favor by a number of pips the profit is predetermined as a certain % of the invested amount
- Selecting a broker
- selecting a trading platform
- Choosing the trade type
- Selecting the right asset to trade
- Selecting the investment amount for a trade
- Trade execution
1. Broker Selection
There is no shortage of brokers today on the binary options market and more are coming every day. Many are very similar in their offering and finding a broker that fits your need requires a bit of research. Still with so much choice out there it should not be to hard finding one that offers the service and tools you require to trade. Brokers either offer proprietary platforms developed by their own company and that are configured with unique features and trade types, or they offer a turnkey solution which enables the providers to configure features of the platform to the broker’s specifications. The majority in the industry are the latter ones.
2. Platform Selection
Choosing which platform you want to trade on is also determining what trade types are available for trading, altogether there are like 5+ trading types with some variations and the moment you know which trading type you prefer and are best skilled in you also will know which platforms to choose from. This is an important choice and it might take a little bit of time to find the right trading type for you.
2. Choosing the Trade type
There are several kinds of trade contracts available in Binary options. But like in poker you do not need to know them all. One you know how you like to trade and what time frame you are most comfortable with you are on the right path. Broker are trying to invent new trading types all the time so if there is no perfect options for you today there might be in the future.
3. Selecting an Asset
In general there are four asset classes traded: currencies, stocks, commodities, and indices. Each of these assets groups are different and have their own individual characteristics. This is all about what they trader prefers to trade, in general also here you cannot master them all, stick to a select few assets where you feel you have a good grasps of what the market will do.
4. Investing in the Trade
It is very important to keep the risk to the trade within acceptable limits. Some advice that a trader must not trade more than 3% of his account as the investment amount. This will help you to keep your losses manageable. Here people that ran fast run out of breath fast. The amount can luckily never exceed the total amount in the account. (No margin calls)
5. Trade Execution
Here you select the right trading parameters, make a habit to go over everything in the right order so it becomes second nature to check everything.
If you selected everything and selected the amount and opened to the trade to only find that you did not select the right asset you will want to hurt yourself. But believe me when I tell you, that you would not be the first one it would happen to. Luckily in binary options you have a change to come out on top even when you make thee mistakes, better to avoid them altogether by going through the checklist ( no matter how small this list is) and then execute your trade