Binary Options is a classic trading tool that provides traders with a simple and straightforward avenue for accessing the financial markets. The tool has an intuitive profile and can be used to trade assets across currencies, commodities, indices and stocks. The payout percentage varies according to the risk level of a trade.
About Binary Options
Binary Options is the most popular trading tool on our platform. It allows you to choose the parameters of your trade including the Expiry Time, investment amount and payout percentage. The trick is to study the past price movements of an asset so you can predict its future direction.
This tool is the “vanilla” or basic way of trading with binary options. For example, let’s say, GBP/AUD is trading at 1.736. Based on charts and economic indicators, you speculate that the price of the asset will rise in the next two hours. So you decide to place a Call option on the currency pair at 11:42 GMT with an investment amount of $50 and payout percentage of 62%. The option expires at 13:30 GMT.
At the set Expiry Time, if the asset moved in the direction you originally anticipated, the trade ends In-The-Money and you earn a payout of $81.
How to Use The Tool
Binary Options is the first tool on the Stellar Finance trading platform toolbar. Once you select the tool, you will be redirected to the page where you can enter your trade parameters. To help you inform your trades, we put 3 features at your disposal.
To use Binary Options:
- Log into your account and head to the Trading Room.
- Select Binary Options from the toolbar.
- Choose an underlying asset. This can be a stock, an index, a commodity or a currency pair.
- Choose the timeframe and chart type for your price graph.
- Enter an Expiry Time for your trade. On the platform, this is a pulldown menu.
- Type in your investment amount.
- Choose your payout percentage. This will also dictate your risk level and protected amount.
- Choose “Call” or “Put”.
- Approve and confirm the trade.
Features of Binary Options
With Binary Options, you can trade assets across all 4 asset classes. You can also define your own risk level by choosing your payout percentage. For example, with a payout percentage of 75%, your risk level is 100%. This means that if the asset moves in a direction different than you originally anticipated, you will lose 100% of your investment amount.
In contrast, by choosing a payout percentage of 62% or 20%, your risk level decreases.
2 Trading Strategies That You Can Use
1. Trading the news
It is a well known fact that the financial market is influenced by news events. For example, quarterly earnings reports can significantly move the prices of individual company shares. In general, a good news event is a signal to place a Call option while a bad news event is a signal to place a Put option.
2. Fibo Trap Strategy
The Fibo Trap Strategy is a reverse strategy where the end of a correction is identified so that traders can enter positions immediately when a new trend begins. To use this strategy, place a Call option when the rate is correcting a previous trend in a downwards direction.