Binary Option is a type of financial market in which the amount of profit and loss is determined before the start of the transaction. Therefore, to better understand this type of trade, it is necessary to provide more explanations. In general, as can be seen from this translation, binary options indicate a two-choice “yes or no” option.
Binary options are also a time-dependent trade. That is, a date and time are specified for it, and the transaction must have been completed before the due time. Otherwise, it will act in accordance with the rules and conditions that have already been set for it.
What is binary options and in what markets?
In general, what binary options express is:
Is an underlying asset worth more or less than it is priced at a given time? If it’s worth it, you can enter it as an investor and make a good profit from it.
Thus, in a binary options trade, a trader predicts the value of a particular asset at a given time. Therefore, if by that time his prediction came true, he would have won the deal and will have gained the profit from this deal, which was predetermined. But if his prediction is not correct, he will lose the money he invested in entering into the deal.
For this reason, many people also know binary options as “all or nothing” business. We now have a better understanding of why binary options, option trading, yes or no trading, and the like. Because traders either gain everything or lose everything during it and do not benefit from this trade.
Binary options are for any type of product and tool and in any type of market. The remarkable thing about it is the transparency of the final profit and loss before starting the trade. Also, no complex mathematical calculations are needed to determine the profit or loss and predict success or failure.
Learn more about binary options features
So far, we have found that:
Binary options are also introduced with the names, zeros and ones, yes or no, all or none, and the like.
Binary Options is a time-dependent transaction.
The high profitability of binary options without any need for complex mathematical calculations is already known.
Binary options are applicable in any market and in any field.
But another feature about binary options that makes this type of trade or trade very simple is the amount of investment rate that is determined by the traders themselves. In fact, everything in this trade is in the hands of the trader. This is the obvious difference between binary options and other types of trades.
To better understand this, it should be noted that in fact the trader invests as much as he wants in binary options to predict a particular issue. At the end of the allotted time, if his prediction is correct, he will withdraw his capital and also make a profit from this transaction. If his prediction was incorrect, he would lose the amount he had originally set for the prediction, that is, the capital he had invested, and at the end of the transaction he would have nothing left.
An example to better understand binary options
Suppose there is a binary options deal in football and the question “yes or no” is asked:
Today, the teams of Barcelona and Real Madrid are competing with each other. Will Barcelona win the match at the end of this match? (Of course, this type of transaction may not necessarily be yes or no, and the question arises as to which team do you think wins, because in this case we still have two options and this is also a binary option.)
A trader can consider an amount to enter into this deal, for example, say I will invest this $ 100 and say yes, Barcelona will win.
Then, if Barcelona wins at the end of the football match, the trader will receive $ 100 plus the pre-determined profit for the binary. Obviously, if his prediction is wrong and Barcelona loses and Real Madrid wins the match, the trader will lose $ 100 and make no profit. The same procedure applies when the question is asked in two options “which team wins”.
Are binary options legal options?
From what has been said, you might think that binary options are like betting and therefore an illegal market. But this is not the case and binary options has been recognized and used for many decades as a completely legal method as a trading method in various fields such as stock exchanges, stocks, digital currencies or the field of oil and petrochemicals and the like.
For example, today in the stock market and stocks of various companies, we see the use of binary options. For example, during a binary option we may be asked:
What is your prediction about the shares of this particular company? Has the company’s stock risen or fallen tomorrow at 12 noon?
And you, as a trader, can predict what will happen to the company’s stock at 12 noon tomorrow. So for this prediction, enter a funds of your choice into the trade. Then, just like the football example, tomorrow at 12 noon, according to the correct or incorrect prediction. You will face victory or defeat in this binary option and the amount of profit and loss that was already determined.
Although binary options is a legal trade in the world, its laws vary from country to country. In the UK, for example, binary options are not used for the retail market. Hence, this type of trading in the UK can only be used for large and professional markets.
Binary Options advantages
Because binary options is a form of trading, like any other business, it has its advantages and disadvantages. There are many benefits to this type of transaction, but some of the most obvious are:
Binary options is an incredibly simple and understandable deal for anyone with any level of business literacy. In this type of deal, you do not even have to worry about when to make a profit or loss. It is not possible to face a surprise and a stressful issue at any moment, because everything, including capital, time to make a profit or loss, and the amount The profits and losses of this transaction are quite clear and transparent.
In a binary option, your risk or percentage of risk is completely fixed and does not change after you enter the trade. For example, in stock trading, you are in a risky situation at all times, and any unforeseen issue can cause your capital to suffer a heavy and unimaginable failure. But this is not the case in binary options. You already know what your maximum failure is and this amount of failure is fixed and does not change during the trade.
Ability to control and manage the transaction
Because before you get into binary options, you know exactly what you are going to gain or lose. And your management and control over it is much higher than other types of trades.
High potential for profit
Binary options have more profit potential than other trades and trades. In some binary options, brokers undertake to give you, for example, 90% of your capital as a profit. So if you are sure of your forecast, you can invest a lot of money and in addition to receiving it, you can also withdraw 90% of it as a profit.
Extent of choice
Since binary options can be implemented in any field, there is a huge range of topics and markets that you can enter if you are well aware of them.
Since binary options is a type of global trade, you can log on to the Internet at any time of the day or night. And join one of the binary options groups and enter into a trade.
Binary Options Disadvantages
Although there are many interesting benefits to binary options, there are many risks to a trader in this type of trading. Some of the most obvious and important of these risks are as follows:
Reduce the likelihood of transactions
When the probability of success of a trade is very high, the profit of binary options trades is significantly reduced. While some binary options trades offer a profit equal to 85% of the trading amount for each trade. Such a large profit is only possible when the expiration time of the trade is far from the start time of the trade. Of course, in these circumstances, trades become more unpredictable and less traders are willing to accept such a risk.
Limited trading tools
Although binary options is a simple trade. It requires tools for review and evaluation, which are currently very limited. Of course, most brokers use advanced tables and charts to check the results and perform these trades. The amount of these tools is much less compared to other markets.
Cost of losing trades
Unlike other financial markets where the Risk / Reward ratio is controllable and you can move in the direction of winning the trade. In binary options, the chance of the risk / reward ratio tends to lose the trade.
Risk management limitations
Unlike the Forex market, where traders can have user accounts that allow them to trade mini-lots and micro-lots in small user accounts. Many binary options brokers provide a trading platform. The minimum amount that a trader can use for a trade. This will make you lose a lot of capital when trading binary options.