Binary options have been available for some time in the stocks, forex and commodities markets. They're now also being offered by some trading platforms for cryptocurrencies such as Bitcoin, Ethereum, Ripple and others.
One advantage of binary options trading is that they’re easy to understand. Binary options are often referred to as "all or nothing" trades. They're called binary because there are just two possible outcomes for your trade.
Either the trade is successful, in which you gain a significant profit - often between around 75% to 95% – or else the trade is unsuccessful, in which case your investment sum is lost. You know in advance exactly how much you are risking and exactly what your profit can be.
All you need to decide is whether the value of the underlying asset of the binary option will rise or fall by the expiry time. The time period can be days, weeks or longer, or a shorter one - hours or even minutes.
To trade in binary options you need to find a binary options broker. You can also first open a demo account with some trading platforms to learn to use their trading software and practice trading without risking real money.
It’s important to understand the underlying market fundamentals of the asset you’re trading in as well as having a good knowledge of technical chart analysis.
Bear in mind binary options trading by retail traders is prohibited in some countries. Professional traders are not bound by this restriction, but to qualify as a professional trader you have to satisfy certain criteria concerning capital trading sum and size of trades among others.
It can be possible to find brokers in other parts of the world who offer products which are similar to binary options but carefully differentiated so as not to fall foul of the regulations.
Remember that you are trading against the broker. You need to be able to judge the market confidently at least more than half the time to make a profit as it is the broker who sets the odds. And they are going to be careful to assess the odds and set the returns in their own favour.
The majority of binary options brokers operate outside the US due to strict regulation. At present, there are only a few licensed binary options exchanges within US territory.
Perhaps the best known trading platform is IQ Option. They also offer a free demo trading account facility. The leading US binary exchange is the Chicago-based Nadex.
If you are going to utilize automated trading for binary options, then be sure to deploy due diligence when selecting a trading bot service as there are disreputable operators out there.
Risk management is crucial with binary options trading. Retail traders often end up making losses on binary options because of a lack of understanding of risk management as well as poor knowledge of market technicals and fundamentals.
Provided you utilize binary options as part of a risk-managed trading strategy, then binary options trading can be very useful in hedging risk as well as profitable.