The binary trading market has seen an increase in popularity over the last few years with many opportunistic investors looking for new ways to capitalize on this profitable market. Getting started with binary trading can be a little difficult, and there are thousands of resources and websites devoted to helping you better learn the market. Rather than spending your time sifting through all that information, we’ll try to catch you up-to-speed on what exactly the binary trading market is and why you should care.
What is Binary Trading?
Binary means there are two available options. Binary is often thought of when referencing programming language with the two options: 0 and 1. Binary trading is similar in that you wager whether you think a price will increase or decrease over a specified duration. You essentially bet whether you believe a price will fluctuate up or down, and if you predict correctly within the time frame, you receive a return on your investment.
How Does Binary Trading Work?
Binary trading allows you to wager on common assets like currencies, stocks, gold, or other trad-able markets. You are betting whether you believe some activity will or won’t occur for a time frame.
For instance, an option might be “whether the price of gold will be more than $1,350 by 12:00 PM today.” You wager yes or no and receive a reward based on the outcome.
Binary trading is unlike many other investment options because you are afforded a fixed win or loss. In the example above, you could bet $100 that you think the price would be more, and if you were correct you would win your $100 and another $100. If you were incorrect, you would simply lose your $100 investment.
When considering trading with binary options, it’s important that you understand all parameters of the trade. You don’t own any asset during the transaction and are only rewarded in the event that you predict the outcome correctly.
The Benefits of Binary Trading
One of the main reasons investors like binary trading is the predictability of reward or loss. With binary trading options you have a fixed return and expense. If you predict correctly, you receive a fixed reward, and if you predict incorrectly, you lose your initial investment.
Additionally, in most binary trading situations, you do not have to pay any additional fees or commissions. If you use a binary broker you may need to pay a small commission, but you can still walk away with an 85% return in most cases.
This makes binary trading an enticing option for a lot of traders who have experience and knowledge in a specific market.
If you’re new to binary options, you can also get started without a huge bankroll. The affordability and trader-friendly nature of binary options are the two biggest reasons to consider this type of trading – even if you’ve never tried it before.
Binary vs. Forex Trading
Binary trading often gets compared with Forex trading which is the trading of currency prices on the foreign exchange market. Both of these markets offer online trading platforms and require very little initial capital. They both also involve predicting market changes to assets and provide traders with wealth opportunities.
Although there are similarities to Binary and Forex trading, there are also many differences. While binary options allow you to bet on whether a foreign currency will go up or down within a timeframe, the variability is much less than Forex trading.
As we’ve discussed, binary options are either yes or no. Trading on the Forex market or currency market as its sometimes referred, you must also predict the rate of growth or loss of an asset.
This variability means you can take home larger profit with Forex trading, but also carry more risk. Binary options have fixed wins and losses, which is often viewed as a plus for new traders.
Interestingly enough, binary options are actually a component within forex trading, and many Forex exchanges allow you to make binary trades.
The Future of Binary Trading
In 2008, the SEC ruled in favor of allowing binary options to be traded outside an exchange. This started a mass acceptance of binary trading and many online brokers and exchanges started to form. In fact, from 2013 to 2016, Nandex saw daily trades double from 5,000 to 10,000.
Many experts believe that the binary trading market will continue to grow. It’s a fast-paced environment that offers quick and predictable returns. It has a low barrier to entry which opens the door for new investors who are interested in trading.
Moreover, because binary trades are short-term, limited options, you don’t need to be a financial expert to get started. These factors makes the binary trading market’s future look bright.
If you want to learn more about the binary trading boom, check out the infographic below.