Basic terms in trading of binary options
Trading binary options is the perfect starting point for new traders with little or no experience in finance world. Thanks to the structure of binary options, investors can start trading with small capital and still earn important amounts of money.
Of course, this is also riskier, but for someone with the right skills, binary options are certainly one of the fastest and most effective methods to get benefits in financial markets. However, we are aware that for a person who is starting in the business world, the first step can be a little bit tricky. Your long-term success in trading binary options depends entirely on your knowledge and skills, not in your luck. To predict in a correct way the evolution of the price of certain asset, you need to know what is happening in the markets and how it affects the price of the asset on which you want to operate.
That means that you should read and keep up the date financial news, especially those that may affect asset prices on which you normally operate. You must better start investing in binary options on assets or currencies you have some knowledge, then you will have better success possibilities. Given these are the most popular options, you will have lots of available information to help you to make your decision about the price development. Moreover, you could find even experienced traders who make public their predictions in specialized forums.
Currently, brokers offer their customers all the necessary tools to analyze the market and the evolution of asset prices. These tools are there for you to be used, so learn to use them and extract the most, mainly learning to interpret the various available graphs. Each broker has a different analysis tools, so this should also be a factor you should consider when you choose a broker. A position where binary options traders want to be in, as in the money ITM means the position is profitable.
It refers to a situation where the strike price is below the underlying futures contract price for a call option, or above the underlying futures contract price for a put option. Digital or Binary Option: An option with fixed risk and payouts based on whether the trader correctly chooses whether a financial instrument will finish above call or below put a certain strike price. A price accepted at the outset of the trade which will determine if you end up ITM or OTM when the binary option expires.
The time at which an option expires; this could be 60 seconds or weeks from now. The ability to close an option before the official expiry time. Not all binary options brokers offer this, and there may be some fee associated with early closures. The price of the underlying instrument at the time of option expiry.
For example, if the expiry level is above the strike price of a call option, the option is ITM and you get paid. The percentage return on our investment if end up ITM. The current real-world price of the underlying financial instrument.