Published On: Sun, Nov 25th, 2012

What is Needed to Trade Binary Options?

First and foremost, you will need access to a state-of-the-art trading platform in order to trade binary options which.  This will enable you to perform high quality and informed assessments on a constant basis. In addition, such a tool must supply you with speedy, protected and precise trade execution, status tracking, major economic data and news. You must also be able to reliably execute withdrawals and deposits from and into your account balance with confidence.

Essentially, you need a sophisticated binary option trading platform as a vital and key specification that is completely dependable and not prone to persistent crashes or down-time. To develop such powerful facilities, many brokers have spent millions of dollars in order to produce ground-breaking software platforms capable of supporting binary options trading. As such, these firms are now self-assured that the progressive, safe and highly enhanced trading features of their platforms will assist you in commencing a successful and prosperous investment career in binary options trading.

You will also learn that as your knowledge progresses that you will have access to professional tools that will help you elevate your game to the next level. When designing their binary options trading platform, the primary specification of most brokers was to guarantee its simplistic ease-of-use while still providing a vigorous trading environment.  Consequently, their clientele has possession of some of the most powerful trading tools available on the market today. Once you have selected your idyllic broker, you will then need to register an account and make an initial deposit which you can readily undertake by using a bank wire or credit card, etc.

After completing these simple tasks successfully, you can then begin trading. So, what are the next steps you need to perform in order to earn a reliable income from trading binary options? Your mission could hardly be any simpler. The first step is to identify an underlying asset.  Your broker will provide you will a collection of securities within the main investment groups including stocks, commodities, currencies and indices. In most cases, they will also supply instructive recommendations and tips on the current best selections.

You then need to forecast in which direction you anticipate the price of the underlying asset of your option to progress.  Again, you can refer to your broker’s advice in order to assist you in making the best choice. For example, if you expect that price will rise in value so that it will finish at least one trading point above its opening price at expiration then you should instigate a ‘CALL’ binary option. In contrast, if you anticipate that price will finish at least one trading unit below its opening value at expiration, then you should initiate a ‘PUT’ option.

The final steps need you to choose a sensible deposit and select an expiry time. You can then just relax and track the advancement of your trade until its expiry time elapses. When this event happens, you will be in-the-money if price records a value just one unit above your strike price for a ‘CALL’ option or one point beneath for a ‘PUT’. However, should price finish in the wrong direction by just one trading unit at its expiration, then you will be out-of-the-money.

Your prime objective will be to minimize your risk exposure as you simply cannot ignore this important aspect when trading binary options. You must devise a simple money management strategy so that you will know precisely what your risk exposure will be for every position that you open. In addition, you should only execute new trades if you have determined that your predicted reward over the long haul will be at least double that of your maximum loss.

In fact, a risk-to-reward ratio of 1:3 or higher is preferable. As such, you will need to assess the payout and refund ratios of all assets you plan to trade to ensure they comply with your reward-to-risk strategy. In order to satisfy these objectives, you will need to enhance your patience and learn specifically to focus on the risks involved when you initiate a new binary option as opposed to its potential profits. In addition, you should constantly seek to target only realistic objectives and not to attempt to achieve the impossible.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.