Even though binary trading sounds confusing, it’s actually one of the simpler trading options to understand. It’s also a fast way to make a potential profit if you have decent knowledge of an asset’s value.
Binary trading has a simple concept. You have to decide whether you think an asset’s value will be above a set price by a certain time. If you do, you can purchase a call. If you don’t, you can purchase a put. Once that certain time has passed, if the asset’s value is above the set price, you get a fixed return profit. On the other hand, if the asset’s value didn’t reach the set price, you lose your investment. Every option settles at $0 or $100.
Here’s an example of how binary trading works. Let’s say you have an asset you feel strongly about so you trade for five contracts. The asset has an offer of $70 and a bid of $60, and a question of whether it will be above $4,000 by noon. If you think it will, you can buy the $70 option. If you’re right, your maximum profit is $350 ($70 x 5 = $350). If you think the asset will be below $4,000, you can sell the $60 option. In this case, your maximum loss is $200 ($100 – $60 = $40 and $40 x 5 = $200).
Keeping reading to learn more about binary trading and discover if this is a trading option that’s a good fit for your goals.