Before we dig into Binary Options Trading, it is important to understand first what this trading system is all about. This financial system deals with the idea that a certain amount of money will be won or lost depending on the timing of one’s choice. In other words, if an investor were to purchase a binary option on a particular currency pair at 2 pips then he/she could be assured that his/her investment would lose value with time. If, on the other hand, the investor were to purchase a binary option on a particular currency pair at six pips then his/her investment would also go down. In between these two positions, the actual amount of money that will be won or lost may still vary from time to time. As such, investors use this system to ensure that they are indeed on the winning side of their transactions.
So, what exactly is binary options trading? To make a start, let us take a look at how this type of financial transaction works. Basically, an investor is given a binary trade (either win or loss) and this is done by a broker through a trading platform. This broker is known as the underwriter whereas his counterpart is the financial institution that gives him/her the funds (this is referred to as the broker-dealer).
Once the investor has gained money from his binary options trading deal then he/she must give a specified time for the expiry of the said contract. According to the rules of this system, the underwriter will be the one who will decide the expiry date; hence, the most important part of this trade involves traders keeping track of the various stages that take place in this process. Traders have to keep tabs on the duration of their contract, the price of the underlying assets, and even the rate of changing them and when all these variables reach their zenith, the time for the expiry of their contract comes out.
Since underwriters are allowed to set a particular price that they will be willing to pay for every contract, traders have to be very precise when they predict how much exposure they should get on a certain asset over a certain period of time. Most importantly, they have to stick to the given parameters, no matter how harsh the situation becomes outside. Some traders use the binary trading system to their advantage by taking positions during the days when the value of their underlying asset is not expected to change by more than a single unit and thus, they gain a certain amount of money from this position in anticipation that it will rise on the following day.
Traders also have to pay close attention to other factors such as the size of the opening and closing gap between the two prices and the duration of the trading session. Traders who rely on their technical analysis skills alone cannot hope to gain the same level of returns from their binary options trading as those who make use of a trading platform. It is important to find an effective trading system with the help of a good broker. The brokers usually have their own systems that they use to interpret market data and come up with their trading recommendations. Brokers make good money through transactions based on their trading platform’s technical indicators.
When you are searching for a good broker to help you with your binary options trading, try to go with someone who has experience in dealing with binary options as well as having efficient customer service. Also, you should take a look at their trading platform and find a user-friendly one and one that let you configure your risk/reward levels. You also have to find a broker who provides easy access to their demo account so that you can learn more about the trading system without incurring any financial risk. Once you have found a good broker, you will be able to start making good money from day trading binary options.