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Date of Entry : 2016-03-03
Year : 37

Basic guide to trading binary options

on Sat Dec 02, 2017 6:00 pm
Basically, binary options trading involves making predictions on whether an underlying asset is going to go up or down. In this trading, there are only two outcomes: you either win or lose.

As a trader, it helps to understand binary options trading before you begin trading. Binary trading is different from traditional options, and you will find that it has different fees, risks, and payouts.

If you are looking to hedge or speculate, binary options are a great alternative for making predictions on assets. In this post, we want to get binary options trading explained to help you carry out the right moves.

In all different contracts, there are three key features traders need to learn and understand.Expiry time: This is the period between buying the option contract to the time it finally closes. The period can vary from one minute to a month. Most traders usually opt for short term options that last from 60 seconds to 30 minutes.

Strike price: This simply means the price at which a call or put option can be exercised. For example, the current price of gold can be $1,500, and the winning trade gets 80% return. You place an “up” bid with let’s say $100. When the contract closes, and the gold price goes up, you get back your $100 plus 80% of your placed amount. In this case, you will have $180 at the end. In case your prediction was not correct, you lose the $100 you have put in the option.

Payout offer: A payout offer is a return, usually in percentage, that the broker offers to traders. In the gold example above, the offer is 80% for a successful trade. The maximum potential loss is limited to the amount invested in the option. However, some traders can give an offer of up to 10% for a loss. As a trader, you will know these percentages before placing your bid.

In the past, there was only one trading option for binary options traders. This is the high/low option, also known as up/down or call/put. The increased public interest in this binary trading led to the introduction of new options.

High/low: This is the most basic and common option where you choose whether the price of a stock asset will go up or down by the expiry time.

Turbo:  The same as high/low, but the expiration time starts from 30 seconds. The maximum expiration period on turbo options – 5 minutes. This type of trading is not legal in European countries and USA, because it seems to be very risky, while traders like it for the opportunity to fet high profit in short period of time.

With binary options, your risk is limited to the traded amount, which can be as little as $1. When you lose, the traded value is lost, or a percentage of it depending on the broker’s offers.

So, before trading, invest ample time in understanding the risks and always use the price action in making sound decisions. Technical analysis indicators are also popular among traders.

There are different strategies you can apply, and your choice depends on the situation you have. The straddle trading strategy is one available method for managing risks, and it’s ideal for experienced traders who can identify short-term market trends.

Also, take the time to understand the candlestick chart patterns to help you in judging the state of market prices and the direction they are likely to take. As with any kind of investment, there are risks and rewards, so it helps to understand binary options before making your moves.

With binary options trading explained, you have a somewhat clear understanding of how they work. When you start out, use demo accounts to practice, understand your trading market, use analysis tools to make decisions, and keep track of your trades.

When to Exit

Are you interested in learning more about option trade? Are you unsure of how to go about it and avoid major losses? A big part of engaging with option trade is knowing how to avoid a substantial loss. We put together a guide by knowing the right time to quit a trade. Check out our useful guide below!

Options trading is simply the act of buying and selling call options and put options. While stock trading is often considered risky, you can stay ahead of the game and protect your finances by knowing when to quit a particular option.

There are several signs that it may be time to quit a trade that you can keep an eye out for, as well as different things you can do to stay on top of your options.

As a rule of thumb, you should quit a trade when the original reason you took the trade position has changed significantly.

For example: Perhaps you bought a put option on a failing company. This company suddenly improves, and the earnings are much higher than previously thought.

In this case, you should cut your losses. If you are gaining traction on losses that will have a bigger impact on your portfolio more than they previously did, it would be wise to fold.

Say you own stocks in a company and have owned them for a long time. Clinging to that stock doesn’t mean much outside of paper. If you have a decent amount of stock, cash it out instead of sitting on it forever. It could mean the difference between financial stability for life and another ten years working on stocks.

Many pro traders try to stick to a very specific goal – or rather, a very specific level of self-control.If you get to hit your 100% profit mark, it would be wise to do one of these things:

  • Take all the profits
  • Roll your position
  • Press your position

For example: You’ve invested in a company for a while and have only a few weeks left before the put expires.

Sometimes a competitor begins to improve dramatically. Don’t sit around and wait for your put to expire – take it and run.

Regularly checking up on new events and decisions can help you get a clearer view on how the stock market is doing. Major events can influence the market substantially. Staying informed can help you make the right choice in your trade options.

IQ Option is a futuristic platform with an user friendly design and lots of videos explaining. With this trading software, you can view multiple charts at once, watching tutorials about indicators, and access 24/7 trading. How was our guide to option trade exits? Tell us what you think in the comments below.

Risk Warning: The financial services provided by this website carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose.

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