Right Approach to Trade Binary Options

Right Approach to Trade Binary Options

Submitted by adil on Wed, 06/11/2014 - 09:27

The Correct Approach Starts Here!

Over the last few decades, trends of the market have changed. Investors do not believe in the old way of investing in the long term investments and solid stock like Gold or Silver. Instead, they have been influenced by the technological advancements and innovative ways to trade the financial securities. It is exactly like sending an email that is instantly delivered to a client or a family member rather than using a conventional way of writing a letter and posting it, which will take a longer period of time to reach the concerned person. This new era of technology is all about time management. Every decision has to be precise and should be made in a specific time period so that substantial profits can be secured on investments.

This is the reason why there is an increasing demand for short term investments as compared to hedge funds because they are considered as the only suitable way of generating profits on investments. However, there are certain investors who still hesitate of using the short term investment opportunities. For example, many traders and investors believe that trading in the binary options is like gaming. The main question frequently raised by these traders is that how to differentiate between online trading of these options and betting at the bookie. Although, there is a very thin line between these two activities, yet, binary options trading is taken as an honorable way of trading in many countries.

One important lesson that a new entrant in the binary options market should learn is that it is different than how stocks are traded and the trading can be successful if the right approach is taken. For example, let’s say you are a trader and you believe that oil price will rise in the future. Exxon Mobil is trading in the market at $400 per share and your targeted profit percentage is 5 percent, which is a per share profit of $20 (5% of $400). You purchase 100 shares for $40,000 and expect to earn a profit of $2000. On the other hand, there is another trader and his name is John. He also wants to earn a profit of $2000 but is not willing to invest the amount of $40,000. He purchases a call option in the binary options market for $2500 and expects to generate a potential return of $2000. Therefore, his risk is limited to $2500, but the expected return will be more than he would otherwise earn by trading in the stock market.

This is how it works and this is the main difference between the two. When you are trading in the binary options market, it is important for you to be able to predict the direction in which the price of the underlying asset will move. Moreover, expiry period is also important and a trader should always get the timing right. You can expect to earn a profit of around 80 percent if the options you traded end up ‘in the money’ at the time of expiry. If you get to make the right prediction, you can earn a significant return on your trade position. Every investor in the binary options market is well aware of the fact that market instantly reacts to the news and press releases and the investor can make a lot of money if he understands the market trends.

If you are still unable to decide whether you should invest in binary options or not, then it is time that you give it a shot and make it a part of your portfolio. You will definitely get a chance to make more money on these options as long as you take the right approach.