What is a binary option? It is also called digital option, option with a fixed profit. This transaction has a pre-known profit. The terms of the transaction are defined while opening a particular contract.
The amount transferred to the account, in case the trader was right about his position, consists of two parts:
- The cost of the contract opening, which is returned to the trader’s account;
- Profits stipulated in it (on average, a profit of 80% on the contract value, which is selected by the trader).
- At the same time, it does not matter how much the price of the underlying asset has changed, the trader always knows the profit margin in advance, this condition is stipulated when the transaction is opened.
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For clarity, let’s start with an example:
The terms of a transaction:
The trader opened a $ 100 USD contract by investing the money with the expectation that the gold prices will fall.
In binary options the contract profit is always known in advance, in our case it is 85% of its value.
If the money are invested with the expectation that gold prices will decline, the profit is paid when the price of gold drops, at the closing date of the binary option.
The trader knew what to do, the price of gold did fall.
Under these conditions, as a result of the transaction, the trader receives 185 USD in his trading account. His profit is $85.
Binary Options Features
Binary options have the following characteristics:
Availability – the amount of funds necessary to be able to use this financial instrument is substantially lower than the minimum purchase price of the majority of shares. For beginners brokers provide favorable conditions for transactions, different bonuses and promotions.
Simplicity – mainly payout depends only on the change in price direction. Accordingly, to take a decision the trader need less detailed information about the asset.
Controlled risk – you know the terms of your contract in advance.
Yield – can be several times higher than the funds you deposited.
The fixed income is known in advance, you just have to decide if the price falls or rises.
Binary Option can be opened on the basis of any of the underlying assets: currency pairs, stocks and so on. You just need to make a choice whether the underlying asset price in a specific time will go below or above a certain level.
Another name for the binary option is “everything or nothing”, because of whether conditions are met at the appointed time depends on whether the trader will get profits.
Binary options allow you to accurately calculate the risk and the profit amount when you decide to open a contract.
How to become the best in trading binary options?
Since binary trading is a relatively new financial instrument, for traders, especially for those who have yet to begin, it is not easy to determine the best binary options.
Of course, the options themselves are just a tool, which the trader uses as brokerage service. So when we, at Tradeforex.ng, are talking about the best binary options, we have in mind the best conditions offered to the Nigerian traders by brokers on trading platforms.
As in any field, which has financial transactions, when trading binary options be careful not to fall into the hands of fraudsters.
Choosing the best conditions for options trading, be careful not to fall for scams tempting offers, which can promise you anything, if only you would buy their tricks.
First of all, Nigerian traders should pay attention to the age of the brokerage site, its popularity. Honest young players, of course, are present in this market as well, and they attract users by various bonuses, but the promise of exorbitant profits should alert you. An honest broker who is going to earn together with its customers, can not offer huge profits in the detriment of themselves.