Investing in binary options
What is binary options?
Binary options started gaining popularity in 2008. It was from that time that they began to present serious competitors for forex. Many modern traders consider investing in binary options as an available form of earning in the financial markets.
The opportunity to earn in such a way attracts not only experienced traders, but also newcomers to the field. However, they have to remember that successful trading is not just a matter of luck. And while trading does not require a specialized education, the importance of basic economic laws combined with the utmost diligence and the ability to spot changes in market prices in a timely manner are still required. The basics are a good place to start.
What is the binary options market?
Online binary options, sometimes also called digital options, are options, in which a trader buys an option by betting on a rise or fall in the price of a particular stock or asset, such as an exchange traded investment fund or currency, and in doing so receives all or nothing from the transaction. It is because of this characteristic that binary options are easier to trade than traditional options.
Binary options are also called fixed-income options, and they have a specific date and time of exercise and a known value of potential return in advance.
Not only currency pairs, but also stocks, commodities and indices are among the assets traded. You do not need to know how many points an asset will grow, all you need is to correctly identify the direction of the price movement.
What is a binary options broker?
Before trading in the financial markets, traders are invited to open an account with a brokerage company. A broker is an intermediary between the exchange and the trader or investor, and without a broker, you will not be able to place a bid. The brokerage platform can offer you a lot of useful features, which will make your work much easier:
- Firstly, every company provides clients with a terminal in which all trades are concluded, free of charge. You do not have to find and configure any software to buy binary options.
- Second, any technical questions will be answered by the support team, so you will always have someone to turn to if you have any problems.
- Thirdly, the brokers allow traders to open free demo accounts and learn how to trade.
- Fourth, the platform will always have real-time quotes, news and a large analytics section.
- Fifth, you can download an easy-to-use and handy mobile phone app, which will allow you to stay in the know.
Don't forget that you will also have an account on the platform, where you will be able to view your trading history, manage your account, analyse your income and expenses and develop your strategy.
What is a binary options trader?
People who earn on options trading are called traders. In simple terms, a trader is a trader who acts at his or her own discretion and within the limits of his or her personal interests. A trader buys assets and sells by betting on trading platforms. Originally, traders were employees of a brokerage agency. But with the spread of the internet, the concept has become a little broader. Now anyone with an internet connection can be among the successful traders by trading on an online financial platform.
A trader who plays binary options trading must have a feel for expected trends in the price of stocks or other assets. Evaluate the current state of the market of your selected assets and think about whether they are more likely to rise or fall. If your guess is correct at the date you exercise the option, you'll receive the payout in the amount originally specified in the option contract. The payout for a winning binary option is set by the broker and is always known in advance, usually between 60% and 95% of the contract value.
What is binary options trading ?
So, a binary option is an option that has only two possibilities of return: either a fixed percentage of profit or a loss.
It is this duality that gives it the name 'binary', i.e. consisting of two elements. Traders should be familiar with the types of contracts to better understand what is trading binary options all about. There are so many types nowadays, let us have a look at the most popular and the simplest ones:
- High/Low. The basis of binary options trading is this classic type. This kind of options is a kind of world standard. When trading them, traders are given the opportunity to determine whether the price of the asset will be above or below a set parameter at a certain time.
- One touch. The way it works is that the trader selects a certain available price level, and it is enough for the chart to touch the border of the price level, and we will get our instant profit without waiting for the expiration time, in other words, it is a kind of hedge trading.
- Range. This type of trading operates within a certain range of the price of the underlying asset. A trader is given a certain price range and the profit he receives is calculated on condition that the price remains within the range during a certain period of time.
- Turbos options are often used mainly by beginners to make a quick profit. They are options with a short expiration time. Usually they range from 60 seconds to 3 minutes.
- Pairs. This type of binary options appeared not so long ago, but it is popular with certain types of traders. The idea is that you have to determine which of the two underlying assets (pairs) will trade better over a certain period of time.
Experienced traders would advise you to start with one of the example options, as they are the clearest and easiest to use.
How to trade?
In binary options trading, the same trading and hedging strategies can be applied as in traditional options and asset trading. Before any trade, it is of the utmost importance to analyse the market. There are many variables, which are useful to consider before deciding in which direction the price of a stock or other asset will change over a period of time.
Without prior analysis, the risk of losing your investment will be significantly higher.
People who want to trade options need to know about technical analysis. The main feature of this type of analysis is that it uses past price indicators to help people anticipate the outcome of a trade. This type of analysis can recognize patterns and estimate the liquidity of the underlying assets over the time period you want.
On the platform, this analysis is presented in the form of various customizable charts, indicators, support and resistance levels, etc. Be sure to study this analysis to assess the situation as accurately as possible. It is also an essential part of almost any options trading strategy.
Another type of analysis is fundamental analysis, which is one of the methods used to forecast market trends.
It takes into account various political, geopolitical and economic factors that can affect the economy of a particular country, or the world economy as a whole.
On the platform, you will perform a fundamental analysis by getting the latest news and looking at the economic calendar.
It is worth bearing in mind that fundamental analysis in binary options is a complex medium and is extremely extensive. Fundamental analysis can include a myriad of elements, which will cover different sectors of the economy, politics and geopolitics. But regardless of which industry a particular element will cover, they can all play an important role in the pricing of a particular exchange-traded asset.
No matter which option you choose or which tactic you use, it is always better to use a demo account at the beginning, which gives you the possibility to get to know the market without risking your own money.
Where to trade binary options in New Zealand?
You can find out more about online binary options trading in New Zealand by visiting the broker's website. Choose the platform that best suits your requirements and then start trading. As mentioned above, you can first open a practice account with the company of your choice before you open a standard brokerage account.
But the first thing you need to do is register on the platform, it's free and doesn't bind you to anything. Just follow the short instructions and wait for an email. Then, after activating your account, you can open an account.
This account enables you to access real-time prices and news, as well as market information. This allows you to make informed choices and helps you make good business decisions.
In addition to this, you will also be able to conduct some test trades using virtual money, which will be placed in the account. You can work with these funds as you wish, monitoring the results and strategising for the future. Be sure to do some research into how the market works and what its dynamics are until you really start investing cash.
A demo account will give you a better idea of how you can make decisions and use the tools effectively. You can practise a lot of trading using virtual money.
Opening a broker account
To start trading binary options in New Zealand, you must have a certain amount of money. Make a minimum deposit into your account, complete your information, and you can start trading. The minimum capital amount to open a brokerage account is indicated by the broker on the website. Usually it is a small amount, which anyone can afford.
A brokerage account is required for making a transaction, this is where you will be debited for your purchase or where you will make a profit if your transaction is successful. From there you will withdraw your capital in any way convenient to you.
Among other things, your account at the brokerage platform will enable you to trade on margin, should you need it.
Leverage is the ratio of borrowed capital to a trader's own funds. Different brokers provide varying amounts of leverage. The amount of leverage may depend on the market that the trader has chosen to work in. In order to get leverage from a broker, the trader must deposit some money, which will later be used as collateral (this amount of money is called margin collateral).
One of the most important things when engaging in exchange trading is to have fundamental knowledge about the market and trading on it. It is important to educate yourself about the basics of trading in order to profit from this investment that you are making. Good luck!