Binary Options: Basic Concepts

Binary option – one of the financial instruments, a contract under which a buyer or seller receives the right to buy/sell a particular asset at a fixed value at a point in time determined by the contract. The asset also has a fixed potential profit. At the time the contract is executed, the option either generates income or it generates nothing.

In the countries of the European community a betting scheme is adopted, in America – a stock exchange scheme. Binary options are actually a type of derivative. They were first registered in America in 2008 and for a long time remained an exotic product for the whole world.

At the time of purchase, the buyer of a binary option executes a prediction of the price of the asset. He will make a profit only if the prediction is correct; if the prediction fails, he loses the value of the option.

In contrast to bank deposits, binary options allow to make profit at any time, the minimum time of expiration is only 1 minute, the maximum time is 6 months. This approach is convenient both for those who prefer “quick” trading and for supporters of long-term investments.

Financial education solves many things

Nowadays the advertising of binary options attracts a huge number of newcomers and non-professionals to the economic market. People who come literally from the street are trying to convince them that they can predict the euro-dollar exchange rate or the rise/decrease in the value of shares of leading companies. Mysterious and alluring charts are drawn, but what can a person, who is not versed in the quotations of the interbank market, understand in them? What is the probability of correct forecasts by such a player? That’s why so many people are simply disappointed, left with an impressive hole in their own wallet.

But it is quite possible to learn how to do it, do not forget that the income from the options and Forex thousands of traders live. However, you shouldn’t expect a quick miracle. You will have to study all types of analysis (fundamental, technical and volumetric), understand the indicators and candlestick analysis. It is necessary to constantly monitor the economic news. And practice making forecasts all the time. There’s no need to believe in promises that you can click your mouse on countless profits in five minutes. Any trader, wishing to become successful, should study futures, find out everything about stock exchanges, learn Forex – and only then the financial market will become promising for him.

On Wall Street, traders learn three things. The main one is technical analysis. This is the backbone of trading. It includes Dow Theory, basic strategies, candlesticks and bars, and market indicators. Technical, fundamental and volumetric analyses are required precisely in order to understand – how and what the result will be for the trader and how to ensure income for years to come.

It is better to start working at the exchange with binary options. A simple bet on a specific price level for the duration of the espiration, a fixed payout amount, a low initial bet and no risk of losing the entire deposit at once (unlike forex) allow you to earn your first capital and lay the foundation for financial experience. This is the best motivation to learn all three types of analysis and the opportunity to build skills for forex and other binary exchanges.

Binary options trading is available wherever there is an internet connection. But it is the Internet with its overwhelming advertisement of binary options which created the impression for the financially unsophisticated majority that the options are akin to gambling, a kind of roulette in a casino or a bookmaker’s betting on horse races. The beginner is sure of only two mutually exclusive things: that he is going to snatch the cherished jackpot and that the owners of the Internet site will not let him do it. The beginner has no time and does not really want to study the nuances of the market analysis in more depth and breadth. As a result, the great number of those who want to trade is reduced to a few, those who understand that there will be no easy and quick money.

Yes, binary options are ruthless to the weak and lazy. But to master any job that brings income, it takes a long time to work. And yet there is a powerful argument in favor of taking up trading. In binary options the risk to lose everything is minimized. The player knows in advance the amount of expected profit, understands how much he takes from the deposit for betting (this is the amount he loses if the forecast is wrong, without risking the entire deposit). If the forecast is justified, the profit can be very significant, which attracts new players.

You can give some tips for them. First – set realistic goals, for example, to win back up to 10% of deposit in a month. Second – do not throw anything around, it is better to “get a good handle” on two or five options than waste the deposit on buying everything. Third – choose the right strategyThe first thing to do is to use the free demos provided by most of the sites. By the way, you can install indicator tips on some of them. But it is better to follow the economic news, analyze the market and make bets based on the analysis.