Binary options trading represents a way for a person to get quick returns on money invested in the market. Binary options is the term given to a type of trading where the investor either wins a fixed amount or nothing at all--thus the term "binary." While it can be risky, the payoffs are significant and if you know your market it is an excellent way to make your money grow quickly.
A Binary Options Trading Account
In order to trade binary options you will need to open a binary options trading account. There are several to choose from online. Binary options brokers are usually specialists who only offer this type of trading. You will find that binary options trading is very much the same across your choices in brokers. This might make it difficult to differentiate between brokers so you will want to learn the available assets you can trade against along with their expiration terms and rates of return.
Funding Your Trading Account
Of course you need to have funds readily available in your binary options trading account. When making the choice among trading account brokers, you want to look for features such as the variety of payment options (credit/debit card, Paypal, Moneybookers, etc.). You also want to get full disclosure of the fees that will be required for transfers. Some even have no-fee provisions for funding your account. Pay close attention to the security provided by any trading website that you use and make sure that there is a 24-hour customer support line should you have troubles.
It is best to choose an asset that you know something about so that you can make decisions based on experience and not emotions. You can choose to either focus on a single asset or select multiple assets. Selecting multiple assets has a couple of distinct advantages. First, you can spread your risk. In other words, the negative impact of a loss, if any, will be lessened. The second advantage is that you have a greater number of opportunities to make the maximum profit.
Choosing the Option
There are two options you can choose from with this type of options trading. If you are speculating that the price of an asset at maturity (the spot price) will be higher than the threshold price (the strike price) then you want to choose a call option. On the other hand, if you are speculating that the spot price will be lower than the strike price at the end of the maturity period then you want to choose a call option.
The Maturity Time
The other variable you want to choose is the time at which the option matures. This is the time when you will evaluate if the spot price is higher or lower than the strike price. Binary options brokers allow you to choose a date in the future, 24 hours, a few hours, and even an hour from the time you make the contract. Choosing the date/time of maturity (sometimes called the expiry date/time) requires analysis on your part to determine how you project the price to trend.
Watch and Wait
Watching and waiting requires analysis of how the asset is performing on the market. If you make some wrong calls in the beginning, analyze the asset's performance and make adjustments for future options purchases. Remember, it is always preferable to spread your risk among several assets (buy several different options) to minimize the impact of your overall losses should you have any.