The world of Forex is fraught with danger and risk. The volatile nature of the markets means that they are often very unpredictable and, as a result, people lose and gain extremely large sums of money in an instant.
The risks associated with Forex are inherent and this means that no matter how much you plan, prepare and research, you’ll never be able to bypass all risks.
Despite this, there are several tactics that you can use in order to minimize these risks and maximize your chances of turning a profit. One of these ways is through something known as Binary Options…
What are Binary Options?
Put simply, when using binary options to trade, the trader has to make a directional decision: will the value of the currency go up or down? This option is taken over a period of time that ranges from 30 seconds to one year.
The timescale is then known as ‘the session’ and at the end of the session you can either win, lose or breakeven. Binary Options trading is always for a ‘fixed return’ so, whether the commodity you select goes up slightly or massively, you’ll receive the same amount.
Let’s Have an Example:
So, if you think that the value of oil would increase over a 4 hour period and your wager is proved correct you’ll receive a fixed amount. This amount is the same whether the price of oil goes up 1GBP or 30GBP per barrel. Often, this means that potential gains are not as high as in other markets but, crucially, potential losses are also reduced.
This means that if the value of oil would have dropped during the session, the trader would have lost the entire amount of their investment no matter what the circumstances. This is one of the main advantages of Binary Options trading as it means that you do not lose more than your investment amount like you would do using other traditional trading options.
Binary Options Represent and Up and Coming Market:
The ‘fixed risk’ element of Binary Options has seen them become increasingly popular as a trading option. Binary Options are far simpler to understand than traditional trading options and, if you’re a beginner who is considering venturing into the world of Forex, they can be a great starting point because of this simplicity.
There are only Three Choices to Make:
So, if you’re trading using Binary Options, you only have three things to decide:
- What Asset you’d like to trade
- Whether its price will rise or fall
- What period of time you’d like to wager over
To conclude Binary Options do not eliminate the inherent risks associated with Forex, but they can certainly lower these risks as they offer fixed losses and fixed profits. So, if you’re thinking of venturing into the world of Forex, consider using Binary Options to begin with as they’re much simpler to understand than other options.
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