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Binary options are a type of exchange contracts. They are often called a derivative financial instrument but they differ from stock trading mainly by their simplicity and clarity. For successful trading in the binary options market, you don’t need to have an experience in financial operations or an investment portfolio of tens of thousands of dollars. The most important thing about binary options is the profit that you can get by defining the right direction of the asset quotation. This simplicity allows managing risks and allocating the sum of a trading account, visualising the daily, weekly, or monthly profit. The instrument exists since 2008 and it has been at the peak of popularity for the fourth year in a row.
The trading is rather transparent: a trader opens a deal for the direction of movement of a particular financial asset rate. There are only two possible options: either a forecast turns out or a trader fails, i. If a trader makes a right forecast, he gets a fixed bonus. Otherwise, he loses the sum he opened the deal for, leaving the whole remaining deposit untouched.
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The actual difference between the asset rate at the moment of purchase at option and the rate at the moment of the option exercise is not important. While a trader’s profit in the Forex market depends on the rate difference, a profit of a binary options trader depends solely on the right choice of trend’s direction. You get a fixed profit with the margin known in advance making exact predictions of your risks at the same time. This makes calculations easier, as it is possible to count up a potential profit margin for each trade. The number of trades with options per day a trader has depends only on his trade model and skills. He may have even more trades with options than trades with actual assets, as it is easier to manage open positions.
This trading is considered to be less complicated and more suitable both for beginners and for the traders who do not like high-risk trades. Moreover, for traders with a small deposit, binary options market will be more feasible than any other, due to the sums allocation among trades. In comparison, the majority of Forex traders start working with a deposit of less than one thousand US dollars, and the cost of a trade ranges from several hundred to several thousand dollars. Relatively low risks, easy management, and the minimum entry threshold make this instrument not only high-yielding but convenient and far more dynamic than its old counterparts.