A binary option is a derivative. The trader can trade derivative on any instrument. People opt for binary trading as it is a straightforward trade option. It basically deals with the term yes or no; hence, the term binary. There is no complexity involved in binary trading which is why they are also known as “all or nothing.” However, to make profits out of binary options the trader should keep a check on the news announcements, global trends, reviews, etc. You can trade in commodities, stocks, foreign exchange, etc. There are many online signal providers that provide free signals.
Important terms used in binary options
- Call option: It is one of the most used terms in binary options trading. Call option indicates that the price of the asset will rise in the future.
- Put option: It is the opposite of the call option. The trader purchases put option when there is a possibility that the price of the asset will fall in the future.
- In-the-money: This term is used in binary option when the trader predicts the movement of price correctly.
- Out-of-the-money: It is used to describe the situation where the trade has made wrong predictions in relation to the movement of price.
Types of binary options trade
- High/low: It is the most used type of binary options trade. Here, the trader is required to determine whether the price will be high or low in comparison to the current price at the expiry time.
- One touch/no touch: This trading option is different from high/low trading. The trader here determines whether the price of the trade will touch the strike price or not.
- Pairs: This one is a relatively new type of binary trading option. Here, the trader trades on the basis of comparison between two assets. The trader is asked to determine which asset will trade at a higher price at the expiry time.