Binary options are some of the financial assets available in the financial markets of the US and a few more countries. They are also amongst the easiest to trade in, requiring minimal information and almost no expertise.
What is the role of the trader in binary trading?
The investor in binary trading is only required to give an affirmation or a negative answer to the question whether a particular asset in the market will exceed a given price or fall below it at a specified time – simply saying yes or no. So, if the trader places a trade and says yes and it happens to be, or says no and it happens to be, then that trader wins. That is what happens in the financial markets of the US, Canada and elsewhere, when dealing with binary options.
Here is a sample question:
- Is the price of gold going to exceed $1,245 at 1pm today?
If the price of gold is $1,246 at 1pm today, the investors who said yes win the trade, while those who said no lose the trade.
One of the most attractive aspects of binary options trading is that such traders are aware of the exact amount of money they stand to earn if they win the trade as well as the alternative – the exact amount of money they stand to lose if the trade goes against them. In effect, therefore, it is relatively easier to get people who are new in the financial markets trying out binary trading than it is to get them to invest in long term assets like company stocks. Many investors also find binary options more predictable than long term investments; and predictability, obviously, gives binary options traders a higher chance of winning the trade.
Basic information that an investor should have
A person preparing to engage in binary trading needs to have some basic information. For example, even if there is room to engage the services of a binary options broker, it is important to know if binary options are available in the particular market. In the US and Canada, binary option trading is, of course, vibrant.
It is also important to learn when particular markets are open for business. This is because binary options, unlike trading in foreign exchange, only takes place within certain time limits in a day. It also helps when investors have a good idea what they stand to lose and what they stand to gain whichever way the trade goes. In the US, the premium a trader pays for the trade does not exceed $100. So if a binary options broker asks that you pay a figure higher than that, it should raise a red flag.
Something else is the issue of companies authorized to offer binary options for trade in the US. By the time the government authorizes a company to provide binary options it means it has checked the veracity of the company’s existence and other important factors.
Also in the US, like in many other financial markets, not only is the trader’s profit potential limited to a particular amount, but the risk is capped as well. What this means, therefore, is that binary trading is not one of those betting encounters that can fleece a participant in one or two hits.
How different is binary trading in the US?
For one, a binary options broker requires a license before conducting business in the US. This is not necessarily the case in other countries where binary trading takes place. The great thing about this licensing law in the US is that rather than be punitive to the binary options brokers concerned, it gives them an edge when it comes to investor confidence, even when they are operating business in Canada and elsewhere.