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What are Binary Options?

Your capital may be at risk. This material is not investment advice.
Written by trading expert:Professional Day Trader
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Short resume:
  • Author of the book Options Trading for beginners
  • Worked in finance in 12 years
  • Got a MBA in Finance, BA, International Business Administration And Marketing
  • Built a solid record of achievements through constantly developing financial markets
  • Traded on the most frequently utilized stock exchanges: TSE, LSE,NASDAQ, NYSE, Euronex Actively managed a 6-9 million dollar portfolio
  • Developed new and innovative trading systems and implemented them during trading hours
Matthew O'Connor is the author on the bestseller Option Trading for Beginners
Option Trading for Beginners - Written by Matthew O'Connor

Binary options may make traders consider them more than stocks because it limits your risk. The common name of binary options is binary options. The name reflects the important characteristic of these options, as a trader you might be either correct or incorrect. There is no possibility of anything in between correct and incorrect.
The computer world works according to the binary system. There is only 0 and 1, correct or incorrect. Any application or program you have runs on a binary system as the main principle. The binary options work on the same principle of the binary system whereas the conventional assets can allow different outcomes – your invested amount might increase or decrease. Because of such reduced outcomes, an option can have only two results.

Options Types

· With the low/high options, you can forecast whether the markets will be rising or falling.
· With the one touch option, you can forecast if the markets will achieve a specific target price.
· With the boundary options, you can forecast if the market is going to breakout from a particular price range.

With the different options types, the vital thing is that forecasts come as true or false. By how much value your forecasts come true is not important.
· With the low/high options, the value by which market falls or rises is not important. If even the smallest possible movement is in the favour of your forecast, you will gain on your investment. If even the smallest possible movement is against your forecast, the value of your investment will decrease.
· With the one-touch option, the most important thing is the market reaching the target value or not. The duration for which market sustains at the target value or how far it goes beyond the target value is not important.
· With the boundary options, the important thing is the market breaking out of price channel. The distance covered after breaking out of price channel is not important.

Small Market Movements and Big Profits

In comparison to conventional assets, binary options perform differently. For example, when you make an investment in stocks and the stock increases by 1%%, your profit also increases by 1 %. Similarly, if a stock rises by 5%, your profit will also increase by 5%.

The binary options let you avail a secured payout, no matter what distance the price of stock covers. Depending on the type of option, the payout could be 1500%. This makes binary options a very attractive asset rather than conventional ones for trading short movements.

In case your trade does not perform as per the expectations, the value of your investment will decrease or the whole investment will become zero (in case you invested all the money in a losing trade).

You can start trading in binary options with an investment of only $10. Its higher payout will help you earn higher profits. You can earn more from a $10 investment in binary options than a $100 investment in stocks.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future. In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.
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