If you are looking for the best binary options broker, you probably already know what are binary options and how to trade them. But let us still cover some basics.
Binary options were created to simplify options trading, because classic vanilla options tend to be complicated for ordinary traders. With binary options you have only two possibilities, either you make a full profit or you lose the money you invested in the option. In exceptional cases, when the price does not move at all from you entry, you are given back the price of the option, so you stay at zero.
There are several types of binary options, but the basic one asks you a very simple question: will the price be higher or lower, when the option expires? It does not matter how big the price movement will be, and that is the biggest advantage of binary options.
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This basic binary option is called High/Low and will often give you a profit of about 85 % of your investment. The expiration time varies, you can choose between 1, 2, 5, 15, 30 minutes or longer, some binary options expire after days or even weeks.
Then you have other types of binary options, Boundary and Touch/No Touch. With Boundary options you are saying that the price will stay inside or go outside certain boundaries, it is as simple as that. When trading Touch/No Touch options, you are basically betting that the price will or won’t reach a certain level before the option expires.
The biggest disadvantage of options is that they are limited by time. There is always an expiration time which represent the moment when the price has to do what you thought. It does not matter what it did before or what will it do later. But then you have several advantages that make up for it.
The best thing about binary options is that you need only a small movement of the price and that you cannot get stopped out on a stop loss. Because when you trade a binary option, you pay its price and you can never lose more than this amount you paid, no matter how big the movement of the price will be. You don’t have to worry about stop losses, you just buy your option and wait for it to expire.
This also means that you don’t have to worry too much about your trading platform, because should it have a short downtime when you are trading, it will have zero effect on the result of your binary options trade.