Okay, so you’re probably wondering what Binary Options are. Binary Options are a relatively new type of financial instrument that can be traded. Let’s break things down really simply for this first lesson but don’t get too comfortable, things will steadily get trickier as you progress through these tutorials. So first let’s break each word down. “Binary” refers to the essential duality of Binary Options, as in these trades only factor in two parameters, up and down. When trading these financial instruments you’re only looking to predict whether an asset (stock, currency, commodity, index) will rise by the end of the trade or fall. Simple as that. Now as far as “Options” goes: in the financial market options are what are known as derivative instruments. Derivatives are basically instruments that are based on the performance of an underlying asset. So Binary Options are derivative financial instruments based on the performance of underlying assets, and traders speculate on whether they will rise in value or fall.
You’re still with me right? When trading these instruments you can either purchase a “Call Option” if you think the asset will go up, or a “Put Option” if you think the option will go down. As far as the four classes of asset you can trade on generally people have a slightly better understanding of Currencies and how they work so for beginners this is a particularly good place to start. Also bear in mind that the underlying asset you have chosen to trade determines when you will be trading. So, for example, if you are trading U.S stocks, you’ll be trading when the New York Stock Exchange is open for business, or 9:30pm – 4:00pm EST. This is actually another good reason to kick-off with Currencies (or Forex), as they are pretty much open 24/5. From 5:00pm EST on Sunday to 5:00pm EST on Friday.