What is Binary Options Trading?
Understanding the process of trading in binary options can be relatively simple once the word ‘binary’ itself is defined. Binary consists of two parts that typically represent a ‘true’ or ‘false’ system. Examples of these systems can be found in nearly every aspect of computing, mathematics, and logic. In terms of trading on the market, however, binary refers to the trade’s conditional ‘true’ or ‘false’ format.
Binary trading allows investors to place an educated bet on specific options, like commodities and currencies. For instance, an investor notices that a contract for gold that has a strike price of $1,500. The investor, considering the recent increase in gold value and its steady incline, believes that gold will rise above that strike price. The contract has a bid and offer option like other trades, but binary options will only be between $0 and $100. These amounts act as a gain and loss cap. This particular contract has a bid of $76 and offer of $80. The investor buys the contract for $80.
The end of the day comes around and gold has maintained a solid $1625. The investor won. This is referred to as ‘in the money.’ Since the person bought the contract for $80, and binary options have a cap of $100, their total profit would be $20. Unfortunately, this also means that they could have lost $80 if the price of gold did not reach the strike price. There are binary trading companies like TorOption, that give investors the resources and tools necessary to make informed decisions on binary options trading.
What are Binary Options Trading Signals
One such tool that these companies can provide is represented by binary options trading signals. These tools come as either a stand-alone program, or it will be packaged with other resources that enable trading with binary options much more simple. Binary options trading signals are, quite literally, signals that a trader will receive to alert them to a potential binary options trading deal. The binary options trading signal programs will use the recent data on any particular market. The analysis of the data will allow the program to properly ‘predict’ the incline or decline of the market, specifically if the market will be above or below the strike price on a binary trade option.
These alerts will let a trader know if there is a potentially good binary options trade available for purchase. For example, there is a gold contract for purchase. This gold contract has a strike price of $1,500, and the current price of gold is only at $1,425. The binary options trade signal program will take data from the previous few hours. It could find that the gold market has been seeing 2-4% increases every hour for the past ten hours. The gold contract in question places the condition that the gold market much be above the strike point of $1,500 in three hours. Now the program can determine that the gold market will, most likely, be above the strike point. The trader will be alerted to the contract.
The binary options trading signals are great resources for both the new and experienced traders. The program will help new traders see some of the market dynamics, how each market works during particular situations, and so on. The experienced traders, however, can get a lot of use from the binary options trading signal programs. Their previous experience with each market will enable them to look at each alert from the program and decide if the trade is still a good deal. After all, the programs do the best they can with the data, but markets are not always so predictable.