What are binary options trading?
Binary options trading are becoming popular in financial markets in recent years. In this type of trading the amount of payoffs is predetermined and the amount will be paid on the date of expiry agreed upon at the time of the contract between the two parties i.e. buyer and seller. Binary option trading system is attracting investors because the amount of risks and rewards is known. The amount will be paid depending on the option selected at the time of contract that can be:
In the money
Out of money
This means it is a win or lose situation i.e. the investor will either enjoy high profit or he will get nothing. Due to these feature binary options trading is also known as “all or nothing”. Binary option trading is classified into two types
Cash or nothing
Asset or nothing
In the first category, the predetermined amount is paid to the investor whereas in the second type the preset amount of asset kept as a security is paid to the investor.
Strategies of Binary Option Trading:
To get high rate of return you have to follow a good binary options trading strategy. Some of the most important strategies are the pairing strategy, hedge and double position strategy, binary options betting strategy and stop- loss trading strategy which are discussed below:
The pairing strategy:
These types of strategies leads towards high returns and profit in a very short time with the smallest amount of losses thus they are quite effective. The pairing strategy as the name implies, pairs the two prices i.e. money call and money put. In this way the amount of profits remains nested in between the two options and excludes any chances of loss. At the expiry date, the price will be between call and put options and these options will generate fixed compensation.
Hedge and double position strategy:
The other type of binary options trading strategy is hedge and double position strategy. This strategy also includes the pairing process of call and put but in this case these are paired to push the amount into double so that it may ensure double safe position.
Stop- loss trading strategy:
Stop loss strategy applies to binary options when the prices are continuously falling down and the trader will sell the binary option when the price falls to a specific value. This is done to reduce the chances of huge losses when the amount of capital invested is high. This type of binary options trading strategy is getting popular but needs expertise and judgement to select the right stop loss time. The selection of stop loss time depends on factors such as risk tolerance, stock market behaviour, type of trading vehicle and trading style.
Binary option betting strategy involves betting of the binary options to turn the movement of the market in case where the market is volatile and gets affected by sudden changes. In this case the investors bet in a call or put option for a big change in the market. Betting strategy works when there are huge investments at stake.
Some of the binary options trading strategy is based on conditions and situations in the market. There are three market stages according to which the strategies are constructed. The three strategies are given below:
Bullish market strategy:
This is a stage where the market is moving positively, the traders are confident about the future market movement and they move towards huge investments. In this situation binary options trading strategy most commonly used are call spread. In this strategy the risk is reduced and investors are confident about the upward flow of the market.
Bearish market strategy:
Bearish market stage is the negative trend of the market and the investors are not sure about the movement. There is more risk factor included in this stage. The binary options trading strategy suitable in this condition id put spread.
Strategy for neutral market:
It is a still and static stage of the market in which the market is not showing any movement in any direction. The binary options trading strategy in this case can be
If you are looking for short term investments with high profit and low risk, binary trading options are the best choice to go for.