This is Banc de Binary’s interview with the experts. This week we speak to Daniel, a broker with Banc de Binary. We asked him about how to successfully trade binary options on stocks.
Interviewer: Daniel, how can someone get started trading binary options on stocks?
Daniel: Well if you’d like to start trading binary options first you need to understand the basics. Now, if you’re completely new to the markets and completely new to investments. I would stick to currency pairs at first until you get a deeper understanding of how the market works.
Interviewer: How about a quick introduction to the basics of trading stocks, how does the price movement work?
Daniel: Let me give you an example. In this case we’re looking at market forces and how the prices change according to them. Now if we have people trying to buy shares and stocks from a certain company, and there are fewer shares within that company to be sold, then of course the stock, or the market share, will rise. It’s basically supply and demand in its simplest form.
Interviewer: And what drives demand for stocks?
Daniel: Well, generally it’s earnings. So basically if a company’s earnings are expected to rise this of course will raise the demand of the share and also the market price of the company per share. On the contrary, if the expected earnings fall we do have a falling demand of the share price in this case. This is basically the best and most accurate indicator. On Wall Street tend to refer to it as earning season.
Interviewer: How does trading stocks as binary options differ from traditional trading vehicles?
Daniel: Well the big benefit of trading binary options is that you do not have to concern yourself with the magnitude of the share price. The only thing you need to consider is its direction. Let me provide you with an example. If you predict that a share price will go up, and you are correct you will win, if you predict that a share price will go down and your prediction is correct then you also win.
Interviewer: And what sort of returns can an investor expect?
Daniel: Well, the thing about Binary options is that you know your return before you actually place the option, now that’s a very big benefit. The vast majority of returns are between 65 to 91 percent
Interviewer: Can you give us an example of how this works in practice?
Daniel: One of the examples I like to give are Apple shares. Now we know that Apple have just released the iPhone 5, but let’s just say that they are due to release a new iPhone 6. We do of course know that Apple’s shares will rise. Having isolated that piece of information you can proceed to go and place your trade accordingly. So basically what you do is go on your Banc de Binary account, you choose the stock, or the share in this case, and you apply the trade. If your prediction is correct then of course you will win.
Interviewer: It’s that simple?
Daniel: That’s all there is to it.
Interviewer: Thank you very much Daniel.