Binary options Definition
The binary option is a way to trade the fluctuation of prices of the open global market. It allows to obtain or a payoff of a fixed amount of money (or asset) or nothing. So, in simple terms, it is binary because you only have two possibilities: win or not. On a first approach, binary option can seems a very simple way to earn money, so that a lot of Forex traders start using it. But really, it is not so simple to enrich with it, as strategies and money management must be very well known to avoid the risk of lose everything.
One of the characteristics of the binary option trades is that it can be different in the different country: this is really evident in the United States exchanges, where structures of binary option is different from those available outside of the US. And in fact, in the US, traders deals with the so called exotic options, referring to the investment made outside the US.
Just like the Forex Trading, the Binary Option (www.Binary24.de) has different orders, or better, different options. The first one, the most common, is the ‘High-Low’ option, that allows to trade in Forex, stocks, asset and indices. The high-low option allows the buyer to have a payoff deriving from the differences between the higher and lower prices reached by an asset during a period of time. For example, imagine a trader knows that a certain kind of asset is known to rally in the close future: he can decide to risk and believe the market trend (or the market voice) and buy a binary option of this asset (in trading language he is buying a call) . After bought, he had to fix an expiring time, that can be of few minutes, of days, weeks or months, depending on his choice. And he had to wager if the price at the expiry time will be above the starting price. If this happen, the trader gain a good percentage of the starting value. If not, he loses his investment. Depending on the brokers, the investment can be fix or can range from a minimum to a maximum, or, in most case, is limitless.
The brokers also allows binary option outside the traders country. This is very common in the United States, where binary options have fixed risks and payout that, in some way, protect the traders. As already said, it is not uncommon to find unskilled people that start to trade because they hear about wonderful gains, but they really don’t know anything about the rules of the market, of the Forex trading and the Binary Options. It is important, before starting, to realize that the risks can be greater, especially for the novices, that in some case can also entry in trades not legally allowed by their country.