Real binary options
Today's investment transactions made by online traders differ considerably from their classic prototype. Firstly, the transaction flow chart has been greatly simplified. There is no longer a need to personally visit the stock exchange and all the necessary institutions to complete the paperwork, or to hold business meetings with a broker. There is also no need to call a broker in person in order to execute a transaction.
The trading software, often called a platform, fulfils the role of a broker, and all transactions can be carried out independently online. You can do this from anywhere you want, all you need is a laptop or any other handy gadget (mobile phone or tablet), and access to the internet.
Investing online is also a great way to start trading without having a lot of capital.
The minimum deposit requirement for online trading platforms is quite democratic, and you can also invest as little as a few dollars. Of course, when it comes to online trading, we are usually talking about derivatives trading. This means that we do not redeem the underlying asset, but have the opportunity to speculate on its value.
Binary options are one of the most frequently used financial instruments by traders. Potential investors are attracted by the option transaction speed (a transaction can last only a few seconds) and also by the possibility to earn good money (some trading platforms offer up to 90% of profit from initial investment).
Let's take a closer look at how trading real binary options in New Zealand works, how real binary options differ from the online version of binary options and how to start trading online.
Real binary options
A binary option is a type of stock option contract that is concluded online regarding the future price movement of an asset over a predetermined period of time. UP or DOWN is the only question that needs to be answered correctly when entering into a binary option trade.
Because a price deviation of just 1 pip towards the forecast allows you to earn 70% to 95% from a single contract!
On the other hand, if the price prediction turned out to be wrong you lose the whole invested amount. Because of this feature options are often called all-or-nothing trades. So you either make a profit or you lose.
Many people mistakenly compare binary options with roulette and draw the parallel: you bet, then either win or lose. This false assumption leads to the fact that most of the inexperienced beginners act randomly when they want to make a quick profit. Of course, such actions more often than not lead to unsuccessful deals and losses. Hence the common perception that trading binary options is a scam.
In fact, online trading is not gambling. Online investing involves understanding how the exchange works, how to analyse the market, how to use trading tools and so on. Therefore, only learning about these issues, as well as practicing on the free demo account that most online platforms provide, will help you make your trades successful.
The forerunners of online binary options, real binary options, originated a long time ago. It is believed that the prototype of the first option contracts in history were agreements between landowners for the right to buy grain at a certain time at a predetermined price. Later, the same contracts were used for purchase of metals, raw materials, and securities. Option contracts became widespread in Holland during the so-called tulip mania, when the price of rare tulip bulbs was negotiated long before they were physically delivered.
Nowadays real binary options are traded on regulated exchanges and involve considerable investment as well as paperwork. They can be either pay-as-you-go contracts, which involve the physical delivery of an asset, or pay-as-you-go contracts, which are only settled in cash.
Assuming that trading binary options online is trading in derivative financial instruments, in this case we are dealing only with cash settled options.
Options are also classified by their duration, by asset and by the direction of the trade.
Online trading platforms offer a good selection of assets for trading binary options. You can choose to trade stocks or you can choose to trade currencies - the choice is yours. It is advisable to choose a market that is easier for you to analyze.
Standard binary options come in two main types:
- On the rise (Call), the choice of this type of transaction indicates that according to his forecast, the trader expects the rate of the selected asset to rise. That is, the payment in the agreed amount he will receive if at the time of expiration, the price rises by at least one ten-thousandth of the original position.
- Down (Put). In this case, the trader believes that the price of the asset will fall. If his forecast is correct, the financier will be rewarded with a certain percentage of the investment.
There is also a distinction between European, American and Asian options. The difference between American and European options has nothing to do with geography. American options can be settled at any time from the time you buy it until the option expires. European options can only be settled on a specified date. An Asian option, sometimes called an average exercise price option, is based on the idea of a payout based on the average underlying price. The process of calculating the payout amount for Asian options is somewhat more complicated than for American or European options.
How do I start binary options trading in New Zealand?
To start trading binary options in New Zealand, find a good broker, register on the trading platform provided by the broker, activate your trading account. After that you can start trading. Let's look at these steps step by step.
Choosing a broker
To choose a reliable financial intermediary in the stock market, check whether it meets the following requirements:
- whether the broker has a licence from the regulatory authorities granting him the right to engage in brokering activities;
- availability of a professional website with all the necessary information;
- availability of feedback for consultation;
- available trading conditions with a wide range of trading instruments;
- availability of technical indicators to analyse stock price fluctuations;
- access to free training materials;
- the speed of responding to requests;
- low service fees;
- convenient methods for deposit and withdrawal of funds.
The broker will give you access to an online platform through which you can make investment transactions.
All online investment platforms use the latest technological advances to facilitate operations.
You will benefit from graphical stock price movements, access to various indicators, the ability to choose a time horizon from a few years to a few hours, and real-time market monitoring.
The multiplier function allows you to increase your initial capital by using so-called leverage, and the user-friendly notification system makes your work more comfortable.
The platform also features a chat room to chat interactively with other market players. You can hide your real name in the chat room by using the incognito mode in the system settings. Another great advantage of most platforms is the availability of free tutorials in the form of articles or videos. We strongly recommend that you check them out.
Quality trading platforms also have a news section.
Creating an account on the platform
Registration on the online trading platform is done in real-time and takes a few minutes to enter your basic details into the registration form. Go to the website of the brokerage company, click the "register" button, enter the requested information in the required fields (that's username, email, sometimes mobile number) and tick the box to agree to the privacy terms. Think of a complex password. Open your email address you gave at registration, find the email automatically sent by the registration system and click on the link to confirm your registration. That's it, your account is ready.
Using a demonstration account
When you first log on to the platform, you will be asked to open a free demo account; do not miss out on this opportunity. No matter how confident you are as a trader at the time you sign up, the new platform includes new things and new subtleties in investing, new approaches to trading. Therefore, at the initial stage, you should test yourself to make sure that you really understand everything with the help of a demo account. On a demo account you will be given a kind of fictitious test amount. You can trade this amount at your own discretion to see if your methods work or not. Of course, if they work, and you can see the profits accumulated on the demo account, then it is not realistic to withdraw these funds, because they are fictitious. But the possible damage will also not be real, and only then will it serve to teach you a lesson about the mistakes you make.
When you feel ready to trade with real money, you will need to fund your real account. The minimum amount is usually quite low, not exceeding a few dollars. There are a number of ways to fund your account, but choose one that appeals to you. We suggest you start with small amounts, as long as you are still inexperienced.
To make a deposit, tap on the 'Deposit' button on the platform and follow the system's instructions. The system will offer you several options to fund your account, for instance by using a bank payment card or any of the payment systems available on the platform. Funds are usually credited automatically. In some cases it can take up to five working days to register.
Withdrawals are usually made using the same methods as deposits.
The success of online investing
Remember that the risk you take when investing in shares online depends largely on your comprehensive knowledge, understanding of how the stock market works, deep analytical skills, experience and even intuition.
It is also important to develop your own trading strategy and personal qualities such as discretion, self-restraint, cold-bloodedness in making decisions.
Trading binary options, especially short term trading with the duration of transactions being as short as seconds, is very stressful for the trader. It is often the cause of impulsive rash decisions that lead to unsuccessful transactions. Therefore, having personal character traits such as focus and stress tolerance is very important.
Choose as an underlying asset an instrument that is easy for you to analyze. Study the methods of technical analysis and how to use technical analysis indicators. Watch the video lessons on the platform. Make sure you open a demo account when you begin trading. Put your knowledge to the test, make sure you understand how all the options on the platform work and only then start trading.
Binary options are a promising financial tool, which can bring you good returns.