Binary options trading – features, advantages and disadvantages.

Many novice traders give up on Forex trading due to their inability to grasp the intricacies of technical and fundamental analysis. For a beginner, it seems simply impossible to forecast the future exchange rate, accounting for corrections or possible trend reversals.

But trading on the exchange offers a variety of options, some of which allow for successful trading even without specialized knowledge—for example, binary options trading.

Binary options trading is a simplified form of trading that considers only the final outcome of a trade over a specific period of time. This means there's no longer any need to worry about another pullback triggering a stop-loss.

The gist.

To place a binary options trade, you simply need to predict what the price will be after a certain period of time—below, above, or equal to the current quote.

You can try your hand with as little as $1 on the InstaForex website . This is the most flexible option, as other brokers typically set the minimum trade size at $20-$50.

Profit.

Unlike regular trading, there's no leverage; you receive a reward of 70 to 85 percent of the trade if you win, depending on the trading conditions. For example, say you bet on the euro rising against the US dollar by $10. An hour later, your prediction is correct—you earn $18.50.

There are also more complex options, where profits can reach up to 400%.

Losses.

If your prediction is incorrect, you lose almost the entire trade amount; you may be left with 10 to 15 percent as a safety net. That is, if your forecast is incorrect, you'll lose $1.50 from the same $10.

Duration.

Binary options trading durations can range from 1 minute to several weeks.

Trading instruments.

Trades can be opened on currency pairs, metals, and certain commodity groups.

Complexity.

Although binary options trading is one of the simplest types of trading, the use of technical and fundamental analysis can significantly improve trade performance.