How do binary options work?
The first thing you need to understand is that there is a big difference between investing in Stocks and Binary Options/Forex.
Stocks
When you invest in the Stock Market, you buy SHARES and keep them for an unlimited amount of time hoping that the price will go up so that you can sell your shares at a higher price that you paid for them. If the market crashes and/or the price of the shares goes down, you will lose the money.
Binary Options
When you invest in Binary Options, you DON'T BUY SHARES, you only BUY THE OPTION TEMPORARILY and send a PREDICTION as to whether the price will go up or down. You will buy only the option to predict how the market is going to behave and set an expiry time as to when do you think the price will be up or down. Let's do an example:
Facebook had big news during the morning and the prices of its shares is expected to go up, so you BUY THE OPTION predicting that the price will go up (Also named CALL) by the 4:00 PM that day. You will not buy the share, however, you will depend on the price of it to earn profits. If by 4:00 PM the price of the Facebook shares went up, you will get your investment + profit, which ranges from 50% to 95% of the original investment, depending on the broker. Let's do the math:
Your investment = $100
Your profit (70%)= $70
Total Return = $170
Now, in the other hand, if the price of Facebook shares went down by end of day, you will lose 100% of the investment.
There are several Expiry Times on Binary options from 60 Seconds to several days to buy the options.
Forex
Forex will be very similar to Binary Options. The main difference is that, instead of choosing an expiry time, you can choose when to TAKE PROFIT from a trade or when to STOP LOSS on the same trade. Lets use the Facebook example:
The news predicted that Facebook Shares would go up so you BUY THE OPTION predicting that the price will go up (Also named BUY) and instead of choosing an expiry time, you will manage your profit or your loss. Let's see the example:
If Facebook share price is at 100 when you bought the option, you can predict that the price will go to 200 that day, so you set up to TAKE PROFIT AUTOMATICALLY when the price reaches 200. In addition, you can set up a STOP LOSS at 50 in case the prediction is not going as expected. In the scenario that the price gets to 200, your profit will depend on the amount of your trade. Let's do the math:
Trade amount = $100
Take Profit at 200 = $200 Return
Stop Loss at 50 = $50 Return
What happens if the news on Facebook are bad and the prices will go down?
On Binary Options you have the option to buy an option predicting that the price will go down called PUT, and on Forex it's called SELL. If your predictions are correct, then the profit for you will be the same regardless of the price of the shares going down.
Differences
1. With Forex you can close your trades anytime you want and take the profit accumulated during the time the trade was opened. On Binary Options, you have to wait until the expiry time you chose is reached to take the profit.
2. With Binary Options you will have the option to win a trade for as small as one decimal. On Forex, you need a bigger difference on the prices in order to have a profitable trade.
3. With Forex you can earn more than 100% profit on your original investment, while on Binary Options your profit is already set from 50% to 95% and you cannot change it.
Both ways of trading are very profitable as long as you have the right education and guidance. Feel free to email me at binarylivingway@gmail.com if you have any questions and visit my YouTube Channel: Binary Living Way in order to keep getting educational material at no cost. Don't forget to join our Facebook Signals group on the button below.
Stocks
When you invest in the Stock Market, you buy SHARES and keep them for an unlimited amount of time hoping that the price will go up so that you can sell your shares at a higher price that you paid for them. If the market crashes and/or the price of the shares goes down, you will lose the money.
Binary Options
When you invest in Binary Options, you DON'T BUY SHARES, you only BUY THE OPTION TEMPORARILY and send a PREDICTION as to whether the price will go up or down. You will buy only the option to predict how the market is going to behave and set an expiry time as to when do you think the price will be up or down. Let's do an example:
Facebook had big news during the morning and the prices of its shares is expected to go up, so you BUY THE OPTION predicting that the price will go up (Also named CALL) by the 4:00 PM that day. You will not buy the share, however, you will depend on the price of it to earn profits. If by 4:00 PM the price of the Facebook shares went up, you will get your investment + profit, which ranges from 50% to 95% of the original investment, depending on the broker. Let's do the math:
Your investment = $100
Your profit (70%)= $70
Total Return = $170
Now, in the other hand, if the price of Facebook shares went down by end of day, you will lose 100% of the investment.
There are several Expiry Times on Binary options from 60 Seconds to several days to buy the options.
Forex
Forex will be very similar to Binary Options. The main difference is that, instead of choosing an expiry time, you can choose when to TAKE PROFIT from a trade or when to STOP LOSS on the same trade. Lets use the Facebook example:
The news predicted that Facebook Shares would go up so you BUY THE OPTION predicting that the price will go up (Also named BUY) and instead of choosing an expiry time, you will manage your profit or your loss. Let's see the example:
If Facebook share price is at 100 when you bought the option, you can predict that the price will go to 200 that day, so you set up to TAKE PROFIT AUTOMATICALLY when the price reaches 200. In addition, you can set up a STOP LOSS at 50 in case the prediction is not going as expected. In the scenario that the price gets to 200, your profit will depend on the amount of your trade. Let's do the math:
Trade amount = $100
Take Profit at 200 = $200 Return
Stop Loss at 50 = $50 Return
What happens if the news on Facebook are bad and the prices will go down?
On Binary Options you have the option to buy an option predicting that the price will go down called PUT, and on Forex it's called SELL. If your predictions are correct, then the profit for you will be the same regardless of the price of the shares going down.
Differences
1. With Forex you can close your trades anytime you want and take the profit accumulated during the time the trade was opened. On Binary Options, you have to wait until the expiry time you chose is reached to take the profit.
2. With Binary Options you will have the option to win a trade for as small as one decimal. On Forex, you need a bigger difference on the prices in order to have a profitable trade.
3. With Forex you can earn more than 100% profit on your original investment, while on Binary Options your profit is already set from 50% to 95% and you cannot change it.
Both ways of trading are very profitable as long as you have the right education and guidance. Feel free to email me at binarylivingway@gmail.com if you have any questions and visit my YouTube Channel: Binary Living Way in order to keep getting educational material at no cost. Don't forget to join our Facebook Signals group on the button below.
