As the word binary itself indicates, trading in binary options has only two outcomes: predicting the asset’s price direction correctly — referred to as in the money, or predicting it incorrectly which leads traders to become out of the money, which basically means loss.
In the event that the trader correctly predicts the price movement of an asset, he will receive a return of around 60 to 90 percent of his original investment. In case of a loss, most — if not all — of the original investment is lost.
But while the thought of a complete loss might seem too overwhelming, the fact still stands that the investments needed to get started in binary options trading are very minimal. Typically, losses for each trade made in this type of financial option are unlikely to go over $20.
Apart from the fact that losses in binary options are guaranteed kept at a minimum, trading in this type of financial option has a number of other benefits that make it an even more highly attractive trading option.
While most investors in other types of options trading often learn things the hard way which, more often than not, entails a string of unfortunate and painful losses, potential binary options traders have the privilege to practice and hone their trading skills with absolutely no risk nor losses whatsoever — by simply using demo accounts.
Traders hoping to profit out of binary options trading need not worry about the risk of possible losses in the trade, as investments are always fixed and minimal. Binary options trading is transparent in such a way that traders know exactly how much it is that they stand to lose, and how much it is exactly that they're likely to gain in the trade. No leverage is involved, and traders can not lose more than what they have decided to put in.
Another advantage that binary options trading has over the others is fast payouts and quick turnovers. Typical expiry times in binary options often last somewhere between 15 to 30 minutes, though this could be shorter or a little bit longer, depending on the type of asset involved in the trade.
Exceptionally confident traders often opt to trade within expiry times as short as 60 seconds. This is because the shorter the expiry time is; the more time the trader has to trade during the day — which basically means he has more chances of gaining profits.
Binary options trading is considered a high-risk investment, and as such, typically yields higher earnings than other financial options similar to it. Potential returns in trading binary options can actually go as high as about 60 to 90 percent, and traders are made aware of the potential payout returns even before the trade is made.
Most binary options brokers allow traders access to a wide variety of commodities, currency pairs, global stocks, and indices. Brokers also give traders the option to explore different assets and help them find out whichever suits them best, as well as diversify their risk profiles.