Everybody is talking about it globally, from stock brokers to experienced day traders and even 18 year old novice investors.
There’s a lot of reasons for the big hype, and the main one is profit.
What are Binary Options….?
A type of option in which the payoff is structured to be either a fixed amount of compensation if the option expires in the money, or nothing at all if the option expires out of the money.
In Lehman’s terms, you choose an asset to either go up in value or decrease, to go up is a“CALL” to go down is a “PUT” the option is the time frame to which you want to trade in for example, you can take an option for as little as 60 seconds called a “TURBO” trade or for the longer term investor you can take an option for a period as long as 7 days, profits can range from 76% to as large as 200%+.
For example, suppose you were interested in buying binary call options for common shares of Apple company with a strike price of $515 per share and a specified binary payoff of $1000. If the stock is trading above $515 when the expiration date is reached, you would receive the $1000 payoff for your option contract. However, if the stock is trading below $515 per share at the expiration date, you receive nothing.
Why trade Binary Options and not the Forex…..?
Forex Brokers will charge you a fee every time you trade, their main goal is for you to trade constantly this way the more you trade the more money they make, they will also leverage your capital as much as 800:1 this means that your £1 is now worth £800 in the markets, any experienced trader will tell you that this amount of leverage is just ridiculous and you will lose, most forex brokers it will be between 50:1 to 500:1.
What is an example of using leverage…….?
As a trader, it is important to understand both the benefits, and the pitfalls, of trading with leverage.
Using a ratio of 50:1 as an example, means that it is possible to enter into a trade for up to 50 dollars for every dollar in the account.
This is where margin-based trading can be a powerful tool – with as little as $1,000 of margin available in your account, you can trade up to $50,000 at 50:1 leverage.
This means that while only committing $1,000 to the trade, you have the potential to earn profits on the equivalent of a $50,000 trade.
Of course, in addition to the earning potential of $50,000, you also face the risk of losing funds based on a $50,000 trade, and these losses can add up very quickly.
Traders suffering a loss without sufficient margin remaining in their account run the risk of triggering a margin call.
Why would you choose Binary Options over the Forex……?
Forex vs. Binary Options
People all over the world are always interested in investment opportunities that can increase returns online. For new traders, Forex trading and Binary Options are two of the most popular trading options that are available. There are different benefits as well as drawbacks of both types of investments. It is important to gather as much information on both as possible before deciding which to begin trading. One of the key differences between Forex and Binary Options trading is the element of risk. The Forex market is highly leverages where there are heightened risks and returns. With Binary Options, traders will have the ability to receive a refund on their investment capital. With Forex, there is no such option and with a loss, all of the investment will be lost.
When it comes to ease of trading, Binary Options are the best choice. Most times, these trades can be placed with a simple four step process. Binary Options traders will choose and asset, enter an investment amount, select the date of expiration and execute the trade. With the Forex market, the process is not always so simple. In fact, Forex trading can be very complicated, which is one reason that most new traders will select to begin with Binary Options.
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There is also a difference with the ease of entry to the market. The Binary Options market was first designed for retail traders. All Binary Option brokers will open the market with very small deposits, some as low as $25. Forex brokers will usually have higher minimum deposit amounts, making it more difficult for new traders to enter the Forex market. Based on these differences, traders will be able to compare and contrast Forex and Binary Options and choose the types of trades that will best suit their individual needs and financial goals.
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