If you are a trader, you have to know one gospel truth. Each trader, regardless the market and the tool he trades in, has to be familiarized with the trading basics. You evaluate the market, buy an asset at the certain price, and start waiting. If a price of the selected asset grows, you can re-sell the asset at the higher price and secure a profit from a margin. There are also the ways to speculate to bear, but in the end your profit will depend up the difference between the asset’s price before and after the market’s movement.
When it comes to the binary options trading, the process is somewhat different. As with the traditional tools, a trader has to evaluate a situation in the market and determine the likely movement of the asset’s price. But a way of the profit’s formation is somewhat different.
Digital option or all-or-nothing option are the synonyms that are used for a denomination of Binary option that is the only one trading tool, which fixes profit and risks before the trading starts. If you had studied the market and determined the correct direction of the asset’s price movement, you will make the fixed profit. If you have mistaken in the forecast, your losses were initially fixed too.
Unlike the traditional trading tools in currency, commodities, and stock markets, binary options do not evaluate the quantitative variableof the price’s movement. In other words, it is totally unimportant, whether the stock’s price has fallen by 1 or 20 points because in case of the correct forecast, your profit will be the same.
If we imagine the reverse situation (if the forecast is incorrect), another one and probably the major advantage of binary options will appear. This advantage is an effective risk management. If you have bought stocks for $10K and the market crashes, you may lose the large part of your investment. But if you trade in binary options, you will avoid such situation even if the market’s conditions are the most negative for you. Your losses will be equal to the initial fixed amount
Binary options brokers provide a fairly wide variety of the binary options types, so each trader will find something suitable. Scalpers can work with the short-term options (15 minutes, 5 minutes, 3 minutes, and even 60 seconds). Day-trading deals with expiration variants from one hour to one trading day are very popular. And those who prefer long-term trading can work with binary options in weekly and monthly timeframes.
As you can see, binary option is a fairly interesting tool for trading in the market. Despite its youth (binary options became popular only few years ago) this trading type becomes more popular among professionals and especially beginners in trading. Causes of this are not only the advantages described above, but also simplicity, easiness, and logic nature of the binary options trading. And taking into account that the underlying assets for binary options are almost all types of markets, it is possible to say that traders are provided by almost endless possibilities.