A binary option also known as ‘digital options’ or ‘fixed return options’ is a financial option offering online traders an opportunity to buy price fluctuations in a several global markets. However, as a binary options trader, you need to understand the risks and the benefits of binary options. These misunderstood instruments are totally different from traditional options and forex trading. Don’t get it mixed up.
But the question is, what exactly is binary options? In this financial option, the payoff you receive is either a fixed amount or you receive nothing at all.
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Binary options explained
Most people get confused when they think of binary-options. Binary is for two choices. Either up or down. Meaning you get a binary when you bet down or up on a product. The binary product could be crude oil, share of a company, stock or gold. Values of binary options don’t stay the same everything, they change because this financial market is controlled by the law of “supply and demand”.
Software for binary options
Professional software are put in place to the work on behalf of the traders. These robots are most common to Binary options beginners. These robots follow a specific algorithm which allows them to always analyze the markets and be able to take the right position at the right time.
The law of the binary options market
Understanding the law of the market means understanding the offer, the demand and how the prices come about. For example, the more expensive a product is, the more expensive it is.
Demand: Imagine you want to go to ‘Justin Bieber’s concert’, think of how much a ticket will cost you. Since Justin is one of the most popular musicians across the globe, the ticket will be more expensive because he is in high demand.
Offer: Since Justine is in high demand, the offer is limited because he can only hold just a few concerts per year. The supply is limited and the strong demand makes the price to increase.
Price: The price is determined by the number of followers Justin has on social media and how much his net worth is or how many digital sales or physical copies he sold. Therefore, the price is determined by supply and demand.
The same example we have used above also applies to crude oil. Oil is a scarce and limited resource which makes it to be more expensive and in high demand. Come think of it, most scarce products are the most expensive ones. Products or resources that are in abundant are cheap.
Reasons people trade binary options
Binary options are easier to trade than the stock market. It is simple to trade from a low amount as little as $100 whereas on the stock market, you can start from at least $10 000 to be able to make money without having to pay too much for the bank commissions.
For people who are interested in binary options, there are online training guides and video tutorials designed to help beginners. The guides cover topics such as “how to speculate Binary options and how to predict if the options will go down or up.
Advantages of binary options
Just like forex trading, binary options also has some advantages:
- Unlike other form of online trading and investing, with Binary, you don’t have to know about it
- Most binary options brokers offer free books, guides and training
- You don’t need to have lots of money to start. You can start with as little as $100 or $200 for some brokers
- To invest in stock, you need to have at least a minimum of $1 000 to avoid losing your money from fee charges
- With binary options, you don’t have to pay any fees. You don’t pay the banker, the broker or anyone
- Everything is done through the internet. There’s no need for you to go to a physical store
Is it legal to speculate on binary options?
One of the most asked questions is “is binary options” legal? Well, in some countries such as France, binary-options is illegal. Most binary options brokers that you come across with on Google are operating illegally. However, binary has become legal in some parts of the world and are regulated. The regulators make sure that you receive quality services and you are safe online.
Is it easy to withdraw funds? How long does it take?
Withdrawing funds from some brokers is very easily. It usually takes about 7 working days for you to receive your money, but some takes 48 hours. There are also some reputable online binary option trading platforms where your money is secured. These platforms come with customer service features such as Live Chat, fast Email response, Skype and many more.
How to deposit funds on my account?
Depositing funds into your account is instant. However, as part of security reasons, you will be required to verify your account by supplying a copy of your password or Identity Document (ID).
Remember to be cautious. If you are ready to trade binary options, it is recommended that you start with small deposits to see if you are able to do binary options or not. To be a good trader, it takes a lot of research and discipline.