In recent years, investors have turned towards binary options trading since it’s considered as an efficient way to increase your capital. Binary options are the easiest financial instruments with lots of new traders becoming successful in this platform since it requires minimum investment and also less risky compared to other methods of trading. Binary options are also referred to “all or nothing” options or digital options since it provides a fixed profit while you make each transaction or a fixed loss. It is similar to betting game where you predict the price trend of any assets like Gold, silver, currency pairs etc. and if your prediction is correct during the Expiry time of the trade, you will get fixed profit or nothing.
For any asset, the trend can be either bullish (price going up) or bearish (price going down) depending on the market conditions. If you predict the trend correctly you will receive a fixed profit for the contract you have purchased and if it’s incorrect you will lose the amount you invested for buying the contract. You should choose the assets which you have knowledge about and select the expiry time. You can get as high as 81% returns for each transaction which can help you increase your capital significantly. It is termed as binary options since we get the result only as either 0 or 1 similar to binary code used in computers.
In order to invest in commodities or traditional stocks you need lot of money and also wait for long duration to obtain substantial profits. But with binary options you need only a small investment and bet on whether the share price will increase/decrease based on your analysis of market trends. Also the returns are much higher (up to 81%) with binary options which can increase your capital. But if you predict wrongly, you will lose the entire money you invested in the transaction. Hence you should have thorough market knowledge on the assets you are going to bet on and develop your trading skills. For that you should below terms clearly,
Expiry Time: It is the time/date at which your trade expires. If the option is not in the money at this time, it will result in loss.
Strike Price: It is a predetermined value which the asset is expected to reach before the expiry time.
Put: A put option is used by traders when they anticipate a decrease in asset price.
Call: A call option is used by traders when they anticipate the asset price to increase.
In-The-Money: During expiry time, if the asset you are trading reaches the strike price then the option expires in-the-money which means you will get a fixed profit out of the transaction.
Out-of-The-Money: During expiry time, if the asset you are trading fails below the strike price then the option expires out-of-the-money which result in loss of amount you had spent on purchasing the contract.
Binary options are very simple to understand and even beginners can make money using it. You can use different strategies as below in order to increase your success rate,
It is a complex strategy in which you pair both Put and Call options on same asset. By doing so, the trader straddles the asset at its low and high points and creates a position between two prices. In such case you will get higher profits for any trade but it requires thorough knowledge on price trends.
It is based on the principle that whatever increases in price will eventually fall down and reach the same original position. Based on this concept, the trader will purchase a Put or Call option depending on whether asset price has moved down or up. For instance, if spot gold price has increased from $1000 to $1200 quickly, you expect it to return back to same price of $1000 and you purchase a put option.
This is a common strategy used by many traders in which the trader after initial purchase of an option finds the asset to be moving in his favor. So he buys another option on same underlying asset to double his returns and maximize the profit.
There are lots of other trading strategies and techniques in binary options trading which can help you increase your capital.