A binary option is a very useful trading tool. With it, you can make a profit of more than 80% of your investment amount even when an asset’s price just moves a pip.
Despite being that useful, binary options do not seem to be really well known; market participants only often refer to famous trading instruments such as CFDs or futures. That’s why this article was written: to help people better understand this great tool.
Binary options are tools that allow you to speculate on assets’ price movement. They work as follows:
- If you predict that an asset’s price will increase, you open Call orders on that asset
- If you predict that an asset’s price will decrease, you open Put orders on that asset
Normally, if your prediction is correct, the binary options broker will pay you a profit of 60% to 95% of your investment amount. However, if it’s incorrect, you will lose the whole investment.
There are many reasons why binary options are preferred, such as:
- They are easy to use
- Binary options allow you to speculate on multiple assets
- You don’t need a large capital to start trading binary options
- They can bring quick and decent profits
Are binary options legal?
Yes. Binary options are widely used by traders, banks and large financial institutions. Most binary options brokers are legalized by at least one financial regulatory body so you can rest assured that your rights are guaranteed by international laws.
Note that before opening an account with a binary options broker, you should check whether that broker’s regulated or not. Never register at uncertified brokers as they can steal your money and use your personal information for fraudulent purposes.
Do I have to be at least 18 years old to be able to trade binary options?
Yes. To start trading binary options, you must be at least 18 years old, and you will have to prove it to your broker by uploading copy images of your personal documents (National ID Card, Driver License, Passport, etc.).
If you are not old enough but still want to trade binary options, you can trade on someone else’s account. However, it’s not recommended.
If I don’t know much about financial markets, can I trade binary options?
Yes, you just need to practice a bit to start trading binary options. However, if you want to make a long-term profit, you will need to learn to analyze the market and practice trading hard.
Below is the indispensable knowledge to become a successful binary options trader:
- Fundamental analysis
- Technical analysis
- Money management
- Trading psychology
How much should I start investing in binary options?
- How old you are
- How much idle money you have
- What your risk tolerance is
- What your trading strategy is
According to experts’ recommendations, you shouldn’t invest more than 20% of your idle money in binary options. However, it also depends on your cash flow; if you have a stable one, you can invest more money.
Normally, market participants under 30 years old tend to invest more idle money and to take a bigger risk than those who are above 55 do. They are also likely to choose shorter-term strategies.
Meanwhile, people who are between 30 and 55 often trade with an intermediate capital, and choose a mid-risk trading strategy.
How much money can I earn trading binary options?
The amount of money you can earn from binary options trading will depend on your capital, trading ability, and your strategy.
Normally, professional binary options traders don’t look for a fixed number when calculating their profit; they focus on the profitability ratio. Their Return on Investment (ROI) often ranges from 0.5% to 6% per month, depending on the trading strategy these traders use. The higher the risk of the trading strategy, the higher the profit.
Which trading strategy should I choose as a beginner trader?
What strategy you should use will depend on the time you can spend on trading. Normally, there are 3 trading styles: short-term, mid-term, and long-term.
Short-term trading strategies (with orders closed within a few minutes to a few hours) are often suitable for those who have a lot of time to observe the market movement. These strategies can generate huge profits; however, they are also very risky.
Mid-term trading strategies (with orders closed within a few days) fit those who can glance at charts several times a day. They have an intermediate risk level.
Finally, long-term trading strategies (with orders expiring within a few months to a year) are suitable for busy people who don’t have much time to follow the market development. These strategies are often low-risk; however, they also have low ROIs and require a high level of patience.
The Bottom Line
Binary options trading is a real business, and to succeed in it, you will have to learn and practice hard. No shortcut.
To learn to trade binary options, you can read the articles on www.finmaxbo.com. The broker offers a comprehensive education center, where traders can access the knowledge of binary options trading from A to Z. In addition, Finmax also provides in-depth market analysis, helping people keep up to date with the latest market developments.
Given using premium accounts, you will be supported directly by personal account managers and professional analysts during your learning process.
How to open a trading account at Finmax?
To open a binary options trading account at Finmax, do the following steps:
- Enter the broker’s official website
- Hit the sign-up button at the top right corner of the homepage
- Fill in the required information and click on the “REGISTER” button
- Confirm your provided email address
- Choose your preferred account type and payment method, then make a deposit.
Just like that, you can start trading binary options with Finmax.