FAQ For The Beginners
What is the risk in the binary options trading?
Unlike other forms of trading, the risk with the binary options is predefined and remains the same throughout the trade. The risk in any binary trade is limited to the investment amount per trade, for instance, if you are investing $ 100 to a specific trade then a maximum amount you can lose is limited to $ 100 only, not more not less.
What is the minimum investment amount per trade?
It is difficult to generalize this amount, but, generally, the range is from $ 1 to $ 50. There are few brokers in the binary arena which allow minimum investment amount per trade as low as $ 1, whereas, there are several brokers who allow minimum investment of $ 10 per trade.
Can I get a leverage as I get in the stock trading?
A big NO. You are not offered any leverage in the binary trading and you can only invest amount which is available in your trading account. Though the leverage has its own advantages, but it can burn you pretty heavily in case the underlying moves in the opposite direction rather rapidly. This problem is not there with the binary options trading.
How much can I get with each pip?
The forex traders are aware of what they can make with 1 pip movement, but, the binary options trading is simpler than it seems. The amount of money you can make does not change with a number of pips, rather it is same for 1 pip or 100 pip.
Can I know the amount I will make for each trade?
The payouts in the binary options trading are predefined and are known to the customer before placing a trade, and it remains fixed for an asset and option types.
Can I close my trade before expiry?
Not many broker offer this facility, however, there are some brokers in the binary arena who allows you to close your trade before the expiry of course with certain terms and conditions, and lower payouts.
How hard is it to trade the binary options?
Executing the trade is simple and easy with the binary options trading. All you need to do is decide the direction of an underlying asset and accordingly select the “Call” or “Put” option to trade. Generally, most of the broker allows a one-click trade execution so once you have clicked the directional movement the trade will be closed automatically.
What are the average payouts?
The average payouts in the binary options trading range between 75 % to 85 %. However, there are some brokerage houses which offers higher payouts for certain options types.
What is the cost of investing in the binary options?
There is absolutely zero cost of investing in the binary options. The brokerage houses do not charge anything for the trading in the binary options. There is no hidden cost nor there is any levy.
Is the binary trading only for the experts?
Though it is desirable to have sufficient knowledge of the financial market, but you do not need to be a financial expert to trade in the binary options.
Do I own the asset I trade?
In the binary options trading, you never take an actual ownership of the underlying asset. You are required to predict the direction of an asset and what happens to the prices of an underlying asset, that’s it.
Why is it called binary?
The binary means either zero or one, meaning there are only two options. In the same way, binary options allow you to predict either up or down, and hence the binary.
If you think that the current scenario is most suitable for the stronger USD against all the major currencies, then the best way to make the profit is to use this information is to trade the binary options. The only thing that has to happen is to move the currency pair by 1 pip higher than the current price to make the gains.
Let’s say you bet that the USD/JPY will move higher from the current price of 113.87 by 3.00 pm. The payout for this trade is 80 percent if you are in the money.
So, if at 3:00 pm the prices of the USD/JPY move to 113.88, then you will get a payout of $ 180 which include 80 percent payout (80% of $100 = $80), and your investment amount of $ 100 for the trade. But if the USD/JPY moves to 113.86, then you will lose your investment amount of $ 100 to the broker.
The trading in the binary options is as simple as indicated in the above example. The above example depicts the trading of classic binary options, also known as the high/low options type wherein you just need to predict the direction of an underlying to profit, and any adverse move to your prediction will make lose your investment amount.