What You Need to Know

Binary Options 101

binaryoptions101

The word binary means two and that forms the basis of any trading involving binary options.

In a binary options trade, there are only 2 possibilities, always. Unlike a normal trade on any other instrument, where you can win or lose or win/lose any combinations of an infinite amount, in binary, this is not possible. The outcome is fixed, and so is the amount that you lose or earn. This is one of the biggest advantages of binary options.

This makes it very useful and attractive for traders, especially for those who are new to trading as they can then focus on what needs to be done to get the best out of the trade rather than focus on the infinite combinations and variables that are involved in normal trading. No need to worry about your margin or your SL or TP or anything else. You, as a trader, just need to focus on the success or failure of your trade.

One of the biggest drawbacks for trading, especially for newbies, is that the win or the loss has no limits. The traders are always at the risk of losing their entire account balance when they put in a trade. Of course, they can control their losses by using SL and TP, but it is a huge challenge for newbies to use SL and TP judiciously. They almost never ever get it right. This is where their true power of binary options comes into the picture.

Whenever you enter a binary options trade, you choose you risk and you also choose the time period of that risk. No more waiting endlessly for your trade to turn into profits and no more do you have the risk of losing the entire account balance. You have strict and full control over what happens to the trade and once the trade closes, you can forget about it and quickly move on to the next trade.

No fuss, no tension and no sleepless nights hoping for your trade to turn. And when you trade on the direct market feeds, as we do in our brokerage, binary options could really help in not only increasing your knowledge of trading and the market but also help you to stay in the market for longer.

In this series, we will also explain how best to trade and use binary options to trade better and smarter.

This article was originally written by Abe Cofnas on ForexMagnates.com.

Editor's choice 2015