Binary Options – A Stable Income

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  • Binomo
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Binary Options – A Stable Income?

Most of you who are reading this article probably have a job and you are bored to death by the monotone activities you are required to do each day. So, because of that, you would like to work something that is more challenging and more flexible.

Binary Options Revenue

One of the key features of binary options trading is that it gives you freedom. You are not required to work for a boss, you don’t need to go to the office, you can work when you want and the potential for profit is unlimited.

Now that we mentioned all the good stuff, let’s move on towards the bad stuff.

Even though binary options trading could be profitable, one key issue most of you do not understand is that it won’t be too wise to rely solely on the potential profit you could generate with binary options.

Our advice for you all and this thing does not apply just for binary options traders, is DON’T RELY ON A SINGLE SOURCE OF INCOME. Find at least two activities that can generate revenue and if you truly want to get involved in binary options trading, have at least one other source of stable income.

Why is that?

Because trading is not a stable source of income. You will have periods when you will make money and some periods in which you will lose money. If you have kids and a family that need to be fed, those periods in which you lose money won’t be too nice.

To conclude, be diversified and don’t rely solely on binary options trading. By having the risk spread, you will avoid being hurt by a losing period.

Risk Warning and Disclaimer

Trading binary options on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in binary options you should carefully consider your investment objectives, level of experience, and risk appetite. No information or opinion contained on this site should be taken as a solicitation or offer to buy or sell any currency, equity or other financial instruments or services. Past performance is no indication or guarantee of future performance.

Binary Option

What is a Binary Option?

A binary option is a financial product where the buyer receives a payout or loses their investment, based on if the option expires in the money. Binary options depend on the outcome of a “yes or no” proposition, hence the name “binary.” Binary options have an expiry date and/or time. At the time of expiry, the price of the underlying asset must be on the correct side of the strike price (based on the trade taken) for the trader to make a profit.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Demo Account!
    Free Trading Education!
    Get Your Sign-Up Bonus Now!

  • Binomo
    Binomo

    Good Choice For Experienced Traders! 2nd place in the ranking!

A binary option automatically exercises, meaning the gain or loss on the trade is automatically credited or debited to the trader’s account when the option expires.

Binary Options Outside the US

Basics of a Binary Option

A binary option may be as simple as whether the share price of ABC will be above $25 on April 22, 2020, at 10:45 a.m. The trader makes a decision, either yes (it will be higher) or no (it will be lower).

Let’s say the trader thinks the price will be trading above $25, on that date and time, and is willing to bet $100 on it. If ABC shares trade above $25 at that date and time, the trader receives a payout per the terms agreed. For example, if the payout was 70%, the binary broker credits the trader’s account with $70.

If the price trades below $25 at that date and time, the trader was wrong and loses their $100 investment in the trade.

Key Takeaways

  • Binary options depend on the outcome of a “yes or no” proposition.
  • Traders receive a payout if the binary option expires in the money and incur a loss if it expires out of the money.
  • Binary options set a fixed payout and loss amount.
  • Binary options don’t allow traders to take a position in the underlying security.
  • Most binary options trading occurs outside the United States.

Difference Between Binary and Vanilla Options

A vanilla American option gives the holder the right to buy or sell an underlying asset at a specified price before the expiration date of the option. A European option is the same, except traders can only exercise that right on the expiration date. Vanilla options, or just “options,” provide the buyer with potential ownership of the underlying asset. When buying these options, traders have fixed risk, but profits vary depending on how far the price of the underlying asset moves.

Binary options differ in that they don’t provide the possibility of taking a position in the underlying asset. Binary options typically specify a fixed maximum payout, while maximum risk is limited to the amount invested in the option. Movement in the underlying asset doesn’t affect the payout received or loss incurred.

The profit or loss depends on whether the price of the underlying is on the correct side of the strike price. Some binary options can be closed before expiration, although this typically reduces the payout received (if the option is in the money).

Binary Options and Regulation

Binary options occasionally trade on platforms regulated by the Securities and Exchange Commission (SEC) and other regulatory agencies, but most binary options trading occurs outside the United States and may not be regulated. Unregulated binary options brokers don’t have to meet a particular standard; therefore, investors should be wary of the potential for fraud. Conversely, vanilla options trade on regulated U.S. exchanges and are subject to greater oversight.

Real World Binary Options Example

Nadex is a regulated binary options exchange in the United States. Nadex binary options are based on a “yes or no” proposition and allow traders to exit before expiry. The binary option’s entry price indicates the potential profit or loss, with all options expiring worth $100 or $0.

Let’s assume stock Colgate-Palmolive Co. (CL) is currently trading at $64.75. A binary option has a strike price of $65 and expires tomorrow at 12 p.m. The trader can buy the option for $40. If the price of the stock finishes above $65, the option expires in the money and is worth $100. The trader makes $60 ($100 – $40).

If the option expires and the price of the Colgate is below $65 (out of the money), the trader loses the $40 they put into the option. The potential profit and loss, combined, always equals $100 with a Nadex binary option.

If the trader wanted to make a more significant investment, he or she could change the number of options traded. For example, selecting three contracts, in this case, would up the risk to $120, and increase the profit potential to $180.

Non-Nadex binary options are similar, except they typically aren’t regulated in the United States, often can’t be exited before expiry, usually have fixed percentage payout for wins (whereas Nadex payouts fluctuate based on the price paid for the option) and may not trade in $100 increments.

7 Binary Options

Binary Options trading is rapidly gaining popularity among financial market traders. At the moment, there are very many brokers who offer binary options as a tool for making money in the financial markets. Most of the people just want to boost their income through trading in binary options. Every person who trades n binary options would very much like to get stable earnings or even get an income that is steadily increasing, from binary options trading.

Making a stable profit from binary options trading is very much possible; however, the trader has to really work hard for this.

Understanding Risks and Rewards

Firstly, you need to recognize that there are no freebies. Binary options trading, in spite of its ease, need special attention and decent dedication from the trader. As a trader, you have to realize that binary options is not a game but rather a job. Then you have to have a basic knowledge of the binary options themselves; how they work, assets involved, types of options, tools used and also other traders’ experience.

Handling the Broker Selection

For a binary options trading beginner who has just chosen to start trading binary options, he or she should first choose the broker that he or she will be using. Then the trader has to get registered with the binary options broker that the trader has chosen. As a beginner, it is always important to look for a broker with a demo account where the trader opens an account and uses virtual money to train how to trade, fundamental analysis as well as the technical analysis of the financial markets.

During the early stages when the trader is learning, it is usually advised that he or she should make every possible effort to try all his or her ready-made trading strategies.

Slowly but surely, the trader will recognize a good strategy that they are comfortable with and also one that will bring a steady income to the trader. Income is usually counted after making seven profitable trades out of a total of ten trades.

So looking at the financial markets, choosing a good broker, coming up with the right strategy are the core steps for a beginner for him or her to start trading.

This is the best way to start trading. However, many binary options trading beginners usually end up ignoring this and rather prefer to dive head first into the pool. Certainly, this depends on the trader, apart from that, negative reviews regarding working with binary options will never lack when the novice traders choose to do this. Traders should always remember that whoever takes binary options trading as a game ends up making very big losses, while those who really work hard end up making huge profits.

Strategy is Crucial

Depending on the strategy, traders usually use signals to trade binary options. Therefore the signals act like kind of beacons, which help to guide the new and experienced traders.

The signals will assist a beginner trader to learn how to trade binary options. Signals are the basis that serves when beginning to develop your own strategy, where each has its own unique trader. By slowly but surely learning new strategies and improving theoretical and practical skills, a trader can develop your his or her own trading strategy.

Both guru traders and beginners use trade signals so that they can make their trading successful. These trading signals enable traders to forecast the price movements of for a certain asset. They actually provide a forecast that has a very high probability of a successful outcome, since they are usually made out of financial instruments analysis.

Profiting from Auto Trading Systems

Most binary options traders use technical analysis techniques to predict the movements of the market prices. But thanks to technology that has made it possible for the automated trading systems that make the process of predicting and placing trades much easier.

These automated trading systems are trading robots, whose operation algorithms include figures, wave theory, Fibonacci numbers and indicators among many other things associated with the financial markets. There are a number of binary options automated trading systems that a trader can sign up for or even purchase or use for free depending on the developer or provider.

The trading robots have a number of advantages. One is a high speed of decision making since the trading robot is capable of monitoring tens or even hundreds of securities prices, quickly make the complex calculations, make a decision and then place the trade. When compared to humans, a human being would not be able to analyze all that information very quickly.

In addition, trading robots are very accurate. They do not make mistakes, except the error has slowly crept into the program code as it was being developed. Actually, all inputs and outputs can be quickly calculated to an accuracy of up to a number of decimal places. It cannot be compared to human traders who sometimes make mistakes during calculations or even when placing orders. Although a well-designed trading platform can protect from some of the errors made by a human trader, there is still a very big likelihood of a human trader making errors.

Finally, the major benefit of using trading robots is that they are not subjective to emotions as human traders are. Most traders, especially newbies, suffer from emotional impulses which make them do a transaction opposite to the logic of the trading strategy which mostly results in losses. The Trading robot on the other hand, strictly adhered to its logic at all time.

Start trading now by opening a FREE account on one of our recommended brokers.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Demo Account!
    Free Trading Education!
    Get Your Sign-Up Bonus Now!

  • Binomo
    Binomo

    Good Choice For Experienced Traders! 2nd place in the ranking!

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Guide How To Become Binary Options Trader
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