Posts Tagged ‘binary options basics’
Binary Option Trading (BOT) is a word that is echoing all over the major economical walls of the world. After an initial resistance, major financial institutions in the world have begun structuring new versions of binary option trading suiting for different economic classes. Today we can see numerous variants of binary trading all around the world. The main investors range from multibillion corporates to daily wagers. There is no doubt that BOT can multiply your investment within few hours. However, like every investment media, it is important to understand the basics of the binary option before you step into this business.
What is Binary option trading?
Binary option trading or BOT is the latest version of the stock and commodity trading. Nevertheless, the character of this platform has many differences from traditional stock trading.
Let us check binary trading option in detail,
- How to do binary trading
- Trading method
How to do binary trading
In binary trading, the investor does not require to buy a particular stock, commodity, or currency. Instead of buying, they can bid for the outcome or the final value of a product (share, commodity units or a currency value).
For example, an investor can buy an option (unit) of a particular share expecting that the share value will gain a fixed point.
An investor invests $ 20 as a binary value for the share of an ‘x’ company of value $ 128.50 expecting that the value of share ‘x’ will reach $ 130 or above at closing time.
If the share value of ‘x’ reaches $ 130 or above then the investor will gain the binary base money X the units the investor bought. That is,
If the buyer buys 10 units of binary options of the ‘x’ company for $200 [20 (single unit prize) X 10 (number of units) = $ 200], expecting that the share of the ‘x’ company reach $ 130 or above. If the particular share, manage to touch $130 or above at the closing time, the investor may gain at least $200 per unit of the binary option. That is, the investor will gain $200 X $10 = $2000.
Binary option trading is simpler and easier than the stock market and commodity trading. Most of the leading binary platforms allow direct dealing between seller and the buyer. There are mainly two types of binary option trading,
- Fixed date trading
- Day trading
Fixed Date Trading (FDT)
In this type of trading, the investor can buy the units of BOT for a fixed date. That is, if the stock, commodity, or the Forex value of a particular unit reaches a preset value at the closing time on the fixed date then the investors gain money. This type of BOT is good for strong investors, who deposit huge amount in the market. The main plus point of this share is that in fixed date trading the investors can sell their units at a higher price if the actual share has a climbing tendency.
Day trading (DT)
In this type of trading, the investor buys BOT units expecting that the particular shares of a company will reach a preset value. This is the most popular variant of binary option trading. This variant is more risky that other versions of binary trading as the trading ours are limited to a few hours. The investor may not be able to sell his binary units for a higher value like FDT as the duration of DT is too less.
It is important to update yourself about the stock, commodities, and Forex values, as precise studies will help you predict the closing value of a particular share.