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What are Binary Options?

With a large majority of people owning a computer and having an access to the Internet, it is likely they have at least heard about binary options trading. 

Still, there are plenty of those who have not, hence we shall try to offer interested South Africans a simple and straightforward response to this question.

So, what are binary options?

The most direct response would be to say that binary options are a simplified form of online trading where a payout is fixed as is the deadline (expiry time) when the underlying asset expires.

Naturally, there is much more to it.

The whole story with binary options trading began in 2008 with US Securities and Exchange Commission making this form of trading legal.  

This was followed by Chicago Board of Exchange starting to offer binary options for public, worldwide trading.

True enough, binary options trading has existed prior to 2008, yet only those traders who were large and regulated were eligible to trade binary options on the over-the-counter market.

Either that or the interested individual had to have a vast net worth to be able to engage in this sort of trading.

Since then, the interest for binary options has not dimmed, in fact, more and more people keep joining the ranks of those who are already actively participating in this exciting investment venture.

Yet, the question, aside from “What are Binary Options?” is – why is it so attractive, not just to South African traders, but to people at large?

What Makes Binary Options So Popular?

There are three main reasons which are the answer to this question – profitability, simplicity and flexibility. This appealing blend is what keeps attracting people to binary options time and time again.

A quick look at any of the binary brokers present online (and the choice is amazing) will quickly reveal that the returns on binary options trading may go from 65-85%, in some cases even higher, which in itself, is a nice incentive to give this type of trading a go.

The fact that traders know just how much they stand to gain or lose for each trade they make is another benefit. As is the fact that they also know the precise time they will have the results.

However, it is the other two, flexibility and the simplicity of the whole trading process that truly seal the deal for the majority of binary options traders.

The simplicity aspect is reflected in the very core of binary options trading which is centred at two possible outcomes – a price of the underlying asset can either climb upwards or fall.

Of course, more factors are involved but estimating what will happen with the price (based on the market information at hand) is at the crux of this trading process.

The flexibility aspect is reflected in the numerous trading options which prospective South African traders have on offer, depending on the broker they have selected.

The various length of expiry times which verge from short to medium and long as well as a list of underlying assets which, with some brokers, number more than 200 nicely round up the advantages of trading binary options.

One should not disregard the fact that traders also have the fantastic advantage of being able to carry out trades regardless of their location as most binary options brokers today also provide mobile trading apps.

And, as the whole trading process does not require a huge deposit (IQ Option has one of the lowest deposits in South Africa – $10) or huge investments per trade, the picture of why binary options made such an impact on the financial market is much easier to understand.

What is Involved in Binary Options Trading Process?

The process, as indicated, is pretty simple and basic, with a few key components:

  •    Selecting a broker
  •    Making a deposit
  •    Selecting the trading option
  •    Selecting the underlying asset
  •    Selecting expiry time

Selecting a Binary Broker

On the surface level, this might seem like the easiest thing to accomplish yet, it is often the most difficult one to do. With over 300 binary options brokers available online it quickly becomes clear this is a lengthy and time-consuming task.

However, sites such as Tradingbinaryoptions.co.za which are traders’ alleys on the matter as broker review sites offer useful and objective information on the brokers themselves. They provide advice on what to look out for when South African traders are trying to find the binary broker which will suit their needs.

It is always wise to start looking at the most popular and well-established names in the industry such as IQ Option, Banc de Binary, 24option or AnyOption.

All these brokers have been present on the market for a long time and many traders in South Africa but also around the world are their satisfied clients.

The best approach is to invest some time, gather as much information as possible, inspect the broker trading platforms, find which underplaying assets they offer as well as which trading options are available with a specific broker.

All these steps are necessary prior to making a final decision.

Underlying Assets

As mentioned in this article, underlying assets are numerous, some binary brokers have more than 200 in their offer.

Yet, it is also important for interested South African traders to know and understand more about each underlying asset and those are usually sorted into four distinct groups – commodities, stocks, indices and currencies.

Doing a research on each underlying asset group is a smart move, as it will provide traders with an insight into what may affect each underlying asset (economic situation, political events or natural disasters), which are considered riskier and which, on average, are most profitable for trading.

Knowing these simple facts which are easy to find both online or, again, on broker review sites like ours, may do a lot in terms of helping traders to make the best possible decision.

Trading Options

Various brokers offer various trading options but what most prospective South African traders can find is the following selection: One Touch, No Touch, Range Options, Long Term, Pair Options, 60 Seconds, High/Low, Boundary Options and Ladder Options.

Not all of these will be available with a selected broker, but this is, in a nutshell, what traders can expect. Each option offers certain benefits in terms of trading and traders can find more info on each option on the broker trading platform.

Typically, traders begin with one of the simplest options which is High/Low as it requires that traders select how they believe the price of the underlying asset is going to move – upwards or downwards.

Expiry Time

Lastly, traders also need to select an expiry time for their trade and those may be as short as mere 60 seconds or as long as 150 days.

This too depends on the option selected as well as the selection of the underlying asset. Some expiry times are considered to be more risky, like 60seconds but they are also more profitable.

On the other hand, longer expiry times are less of a risk but the returns are lower.

The bottom line is, with a bit of careful research and education, binary options trading may be a great way to supplement a budget or even become a long-term solution for making a profit.

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