Now that you are familiar with the basics of binary options i.e. you understand what an underlying asset is, you know how put/call options work and you know what is required to select a good broker, you are now ready to execute your first trade.
3 Steps to Executing Your First Binary Options Trade
Remember that the reason why binary options trading is so popular is that it is easier to undertake compared to other types of online trading. So you can actually start trading in three steps.
Here’s how to get started:
1. Select the underlying asset
The asset that you want to trade is also typically referred to as the underlying. Assets are typically grouped into indices, commodities, currencies and stocks.
The price of the underlying determines the value of the binary option. Whether you choose to trade currencies, stocks, indices or commodities, you are actually not trading the real asset and this is a major advantage of binary options trading compared to other types of online trading.
When selecting an asset, a good idea is to choose something that you are actually interested in. So, if you are interested in technology, you could elect to trade IBM stock or even Apple stock.
2. Choose the expiry time
The next step is choosing the duration of the binary options contract. This duration is also known as the expiry time. The duration of the contract can be as short as 10 seconds while some brokers offer durations as long as one year.
Every trading platform has its own choices of expiry times. Generally, the duration of a binary options contract can be short term, medium term or long term.
3. Select the trading method:
There are different ways that you can trade binary options. For example, you could trade the basic call/put options, touch no touch options, or boundary options. Whichever trading method you choose, you will need to undertake in-depth market research to make the most out of your investment.
Depending on the market conditions and how they may impact, you may decide to enter a basic call/put option or you can choose a boundary—it all depends on the market signals.
Basic call/put option: In a basic call/put option, you decide whether the price of the asset will go up or go down. You will select a call option if you think the price will go up or a put option if you believe the prices will fall.
Touch/No Touch - Here, your broker provides a strike price and then you decide whether the price of the asset will touch or will not touch the strike price.
Boundary options - In this type of trading, you will determine whether the price of an asset will go beyond the price boundaries set by your broker or if the prices will remain within the boundaries.
There are other types of trading methods including 60-second trading, one-touch trading, double-touch trading etc. but these three mentioned above are just the basic ones.
In summary, executing a binary options trade entails selecting the underlying asset, choosing the expiry time and then electing your preferred trading method. Your trade may result in an ‘out of the money’ or ‘in the money’ outcome.
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