More and more people are getting into the stock market trading game, hoping to up their finances significantly by studying trends and taking calculated risks. Although most traders prefer to deal with forex, binary options trading has garnered a good share of the business because of larger returns and the simplicity with which it runs.
As the name implies, binary options is an all-or-nothing model to gain profit in the stock market. It entails a trader to “invest” in a stock, regardless if that stock rises or falls, within a specified time period. The window can either expire after a user-specified time frame — an hour, a day, a week, or a month. The tricky part is in predicting if the stock rises or drops in value within that period. Correctly doing so can earn as much as a 90% markup on your initial investment.
Now that we have the facts out of the way, here are some tips and strategies to start you on your path to binary options trading:
- Take advantage of the “fixed returns.” In trading with binaries, you already have an idea of how much you’ll gain or lose even before you make the investment. You are, therefore, able to do what we call a “controlled risk,” where you can study and plan what to do with your money.
- Make good use of the 24-hour day trading. Binaries are easily tradeable. Essentially, in binary options you are predicting the direction the value of an asset will move in (increase or decrease), compared to forex where you buy a stock and wait for it to rise (which can take months). This characteristic creates opportunities for larger payouts because you can make a number of trades within the day.
- Cook up a plan. Since there is a huge profit to be gained, it is best to have a model with which you can pattern your daily dealings on. Studying the market beforehand is extremely useful and will pave the way for a more efficient schematic.
- Do not over-invest. Think before you act. It is best not to buy on impulse as this would only lead to losses. Trading is not a sport where momentum is a huge factor. Gaining big on your previous two investments, for example, doesn’t guarantee you’ll hit it on the next one, too.
- Get help. Binary options trading can get tricky, especially for starters. Although a lot of the tips here are straightforward and easy to grasp, it is highly recommended that you do your due diligence in doing some background research or consulting with trading experts.