Real binary options
Binary options in online trading appeared not long ago, but they have already gained the commitment of many traders. Options can help you make good money without having to spend a lot of time on a trade. In addition, the low start-up trading limits allow even those without much capital to start trading options, and the use of leverage allows you to increase the amount invested, and therefore the opportunity to make large profits, many times over.
However, using a multiplier in trading has a downside - not only does the potential profit increase, but the potential loss as well. In addition, binary options trading has a large number of negative reviews and some even accuse broker companies of binary options trading of being a scam.
Why is this the case, what are real binary options, how to trade binary options and is option trading a scam are all in our little review.
So, the topic of the review is real binary options in Hong Kong.
How did real binary options come about?
An option is a contract in which the buyer of an option gets the right to buy/sell an asset (currency, commodity, security, etc.) at a certain point in time at a predetermined price.
The obligation to execute the option lies on its seller, who can act both as the buyer (put option) and the seller (call option) of the underlying asset.
By the time of exercise, the following types of instruments are distinguished:
- European - can be exercised only on the last day of the term;
- American - can be exercised at any time before the end of the contract;
- Quasi-American - exercisable by the holder at certain time intervals (the contract provides for one or more time slots).
Real binary options originated a long time ago, some consider the ancestor of the modern binary option contract to be Dutch deals-agreements to buy tulips during the so-called Tulip Mania in the 17th century. Others believe that similar types of agreements existed even earlier, predominantly in the farming sector. Some bought out the right to purchase crops at a predetermined price, insuring themselves against possible price increases, while others were attracted by the idea of securing sales of grain, grapes or other products in advance. Later, such contracts became popular in other sectors. Such contracts did not usually have any fixed form or rules, but were concluded by mutual agreement.
It was only in 1973 that the Chicago Board of Options Exchange established certain standards for entering into option contracts.
What is the difference between a real binary option and an online option?
A real binary option is a contract on an underlying asset that gives you the right to buy or sell it at a fixed price. While the binary option that we can trade through online trading platforms is a deal in which the trader predicts how the price of the asset will behave in a certain period of time and bets a certain amount of money on this prediction.
One can distinguish the main differences between real options and their online counterpart:
- Real options are traded on regulated exchanges and binary options are an over-the-counter instrument;
- The profit of a stock option is derived from either the premium or the price differential on resale; the profit of a binary option is fixed in advance and is paid out if the trader has correctly predicted the price movement;
- Purchasing a stock option allows the trader to purchase the underlying asset in theory, while purchasing a binary option does not.
In fact, binary options are derivatives that allow you to speculate on the price of the chosen asset.
Often binary options are also called 'all-or-nothing' contracts, as this is the only financial instrument that gives an opportunity to either earn almost one hundred per cent profit or lose the whole invested amount. Thus, if a trader's forecast in the direction of the price proves to be correct, the trader can gain up to 95% of the investment amount. But if the forecast turns out to be incorrect, the trader will lose the entire deposit.
This duality of "either/or" caused not only the name of such contracts, but also a lot of negative rumors and reviews.
Why do they call binary options trading a scam?
In its essence, the principle of options resembles roulette, where a player makes a bet. You make an assumption of any kind, for example if the price touches a certain level or not, if in an hour the dollar will be cheaper than the current value or not. Then you buy an option. If at the end of a predetermined time your prediction turns out to be correct, you make a profit, if not - you lose the money you invested in the trade.
The false resemblance to gambling has been perceived by many as an inducement to act at random, relying only on luck. That's what you do in a casino, but not in investing.
Acting at random cannot make a profit on the investment market.
The laws of trading, economic factors, complex processes and calculations apply here.
Obviously, negative feedback is nothing more than an emotional reaction of traders relying on luck.
In reality, experienced traders use sophisticated methods of fundamental and technical analysis to predict possible market trends in the future. Modern trading platforms are equipped with various tools for qualitative analysis - statistics, market analysis section, economic analysis, news section, technical indicators and so on.
To avoid getting into the list of traders, who consider trading binary options to be a scam, learn how to use these functions of the platform, study analysis methods, follow the market, listen to the viewpoints of market experts.
Also, quality platforms are equipped with a "Training" section where you will find many video tutorials on investing. Check out these tutorials. Once you have the theory, try and replicate the examples you see yourself using a demo demo account.
The truth is, binary options are a great financial tool. But like any other investment market asset, it needs to be carefully studied. Surely you won't use an electrical device without a manual, then why are you trading at random?
Binary options trading platform
We can trade binary options using trading software specially developed by brokerage companies. The trading software is often called a platform because of its availability in different versions - for PC, laptop, tablet and even mobile phone.
It is important for traders to choose an appropriate trading platform, as this software will be their workplace online. It is important that the platform contains all the necessary functions, is user-friendly and also intuitive . Of course, it is also important to know what kind of commission the brokerage company charges for providing the service of using such a platform.
Because the reliability of the trading software directly depends on the broker that provides it, be sure to ask about the license to conduct brokerage activities with this broker, as well as check the reputation of this intermediary in the investment market.
If you have made your choice, you will need to register, open an account and then trade.
Creating a user profile
Registering on the trading platform or creating a user profile takes a few minutes and does not require any special skills or technical knowledge. Visit the broker's official website, activate the "register" option and complete a simple registration form. On the registration form, you will need to enter your username as well as your contact details to confirm your registration. You can enter your mobile phone number or your email. Depending on the contact details you choose you will either receive an automatic link to confirm your registration, or an SMS message with an activation code. Activate your profile and proceed with opening an account.
Activating a trading account
Your trading account will open automatically after you register. To be able to trade, you simply need to fund this account. Different trading platforms set different minimum deposit limits, but usually only a few dollars. You don't need to visit a bank branch to fund your account. All you have to do is to click on the "deposit" option and the system will open a list of available deposit methods. Usually, it is depositing with a bank card or using online payment systems. Choose the suitable for you method, type in the amount of deposit and, following the prompts of the system, activate the account.
Withdrawal is done by the same methods.
The training account
Quality trading platforms offer the use of a demo account to try trading in practice, but without the risk of losing money.
Such demo accounts fully duplicate the functionality and capabilities of a real account, but use a dummy amount that you are not afraid to lose.
You can try trading different assets, choose different timeframes for option contracts, customize alerts, learn how indicators work and so on using this account. All quotes are real, so all test transactions will be similar to real ones, except for one difference: you cannot withdraw money from your account.
A demo account is a godsend for the novice trader.
By using your free demo account, you can start learning binary options trading today - after a one-minute registration you will be able to see and try out all the advantages of online trading in practice. Don't miss out on this opportunity and may all your trades be profitable!