What are Binary Options and how does Binary Option Trading differ from Regular Foreign Exhange Trading ?

Binary Options are a very easy way of Trading Currencies, Hot Assets like Gold and Oil and other assets such as Shares – because the mechanics of their operation is so simple.

The word Binary in Itself means that it is a base-2 numeral system. It may sound complicated but actually all it means is making a choice of up and down – this is your Option. And there is not much else to it in terms of the mechanical operation of the Binary Option platforms. It is an all or nothing, or Win/Loss Decision – And you will know whether you have made the correct decision within a few minutes of your choice.

Okay, so perhaps this is an oversimplification of Binary Option Trading, but we shall go into more detail immediately. So you are faced with a question… Will the EURO rise against the USD Dollar in the next half an hour? That is the question.

If you are watching this currency pair and you think that the Euro will rise you will take what is called a “Call” Option and if you think it will fall you will take a “PUT” Option for the amount which you would like to put at stake. Depending on the Binary Option Platform or broker you use, it can just be an UP and DOWN Button or a CALL and PUT button.

Let us for the sake of the argument, assume that you have a lot of cash to spare, and that you will wager a $100 on this trade because you feel it in your bones that the Euro will be rising steadily in the next half an hour and therefore you take a CALL or UP option.

What happens in the next half hour, is that according to how the market will move, you will know whether it has moved in your favour or against your direction. If let us say, you took your call option, when the rate was at 1.1111 – this is called your STRIKE PRICE and the market swings up and down for a couple of minutes but eventually steadily climbs to 1.1122 – at the end of the Half Hour, which is your Expiry Time – you will win your stake. Clap your hands and shake your booty… you are IN THE MONEY or ITM as the lingos like to say.