#binaryoptions Basics What Are Binaries? Binaries are a type of option where the pay out is either a fixed amount or nothing at all – this gives the option its bi (nary) nature. They are sometimes known as ‘digital options’, ‘fixed return options (FROs)’ or ‘all-or-nothing options. Are They New? Contracts for this type of options have been available for a long time. They are sold directly to the buyer by the seller in the ‘over-the-counter’ market. Initially, these options were considered ‘exotic’ until 2008 when the Securities and Exchange Commission approved their listing. Since then, the number of web-based binary trading platforms providing a more simplified version of the trading exchange for this type of options has risen to a number approaching the three figure mark. Nowadays, they can be traded 24 hours a day, 7 days a week. Is It Regulated? Unlike the Forex market which until recently was unregulated but now is, there is no set regulation for the binary options industry. Each company is regulated by the laws and regulations of the country they are registered in. This has seen many platforms based in tax-havens like Cyprus, the Caymen Islands and the British Virgin Island which do not have as strict financial laws as say the UK or Australia, but that does not mean that the companies are of ill-repute. We have to remember that it took some time before the Forex market became fully regulated as well. What are The Differences Between Binaries and Forex? Although very similar in their trading hours and underlying assets, there are many differences in how these two are traded. The main difference between trading binaries and forex is in the risk and exposure. Because the movement in a currency pair or a commodity can be quite small, forex brokers will allow you to leverage your investment by up to 500:1. This means that the rewards can be greater but it also leaves you more exposed, thus amplifying your risk. Binary or FROs however offer a fixed return for making a simple prediction on the movement of an asset over a fixed period of time. You can never lose more than you invested and some brokers even offer a refund of up to 15% on a losing trade. What Can You Trade? The list of binary’s underlying assets that are available for trading has grown considerably during the last couple of years. Today, the assets lists can vary from between 40 – 170 depending on the broker. Currently you can trade a wide array of assets in Currencies – eg Euro/Dollar, Commodities – eg Gold, Stocks – eg Apple Inc and Indices – eg Dow Jones and now even Bonds. This is done during normal market trading hours with many platforms offering weekend investing too. How To Make A Trade? The simplicity in trading these options makes it appealing to anyone with little or no trading experience. In their simplest form, these options are just contracts where a buyer pays for the right to receive a fixed return if the price of an underlying asset finished above or below a target price at a predetermined expiry time. The expiry time can be as little as 5 minutes and as long as a week and a trade can be made in just three easy steps: You Choose An Asset – eg Gold Choose The Direction – eg the price of Gold will be higher than the target price in an hour’s time Choose The Amount To Invest and Click Buy Why Trade Binary Options? More and more investors are making the simple yes or no predictions to generate fixed profits of up to 60 – 360% on every trade. With only limited risk and trading opportunities every few minutes, the lure of large returns based on forecasting price movements, has seen the online binary trading industry become one of the fastest growing and most popular industries online. As technology evolves digital trading becomes quicker and easier allowing traders to develop strategies and have increased opportunities to profit.
Posted on: Sat, 28 Sep 2013 17:39:20 +0000