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Sunday, 8 July 2012

Forex Binary Options

Binary options are an easy and increasingly popular way to profit from the financial markets. A binary option is simply a wager that a security will close above or below a certain price. If the trader is correct, they will receive a fixed payout, which can range from 60% to 500% or more!

An option is purchased at at set price, called the strike price. When a Call is placed on an option, this means that the option must close above the strike price for the trader to profit. For a Put option, the close price must be below the strike price. All options have an expiration time. The closing price at the expiration time determines whether the trade is profitable or not.

There are several varieties of binary options. The simplest are fixed-payout options, wherein the current market price is the strike price for the option. If the trade expires "in the money", the trader will received a fixed payout of 60-70% of their original investment. On a losing trade, the trader will receive a credit of 5-15% of their investment amount. These options are typically hourly, although longer term options are available.

The American Nadex exchange offers a more conventional form of binary option with variable pricing. The potential payout and loss of the option depends on the price which it was purchased. These binaries can also be traded intraday. Other varieties of binaries are available through UK spread betting firms, such as One Touch and Up and Down binaries.

Binary options are available for forex, stocks, indexes and commodities, but we will focus on forex due to the easy availability of chart data and technical analysis tools. You can use any form of technical analysis for trading forex binaries. Fundamental news events such as unemployment numbers and interest rates allow for easy forex profits. You can even hedge your swing trades using binaries.

Some basic strategies for trading binaries include trading on strong trends, trading on reversals near support and resistance, and trading news events. For Nadex binaries, trade cheaply to get the best risk/reward ratio, or trade near certainties to assure regular small profits.

Binary options are becoming the one trading vehicle most appropriate for newcomers, without the learning curve associated with spot forex or stocks. You can profit simply from your opinion on whether the market will close up or down.

1 comment:

Danny Hill said...

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