4 Types of Binary Option: Knowledge that Beginners Understand
Trading in the binary option is one way you can do to get big profits. Things that beginners need to understand is in the binary trading option there are many types that need to be understood.
Is binary option the same as forex?
Both types of instruments above have the difference one of them is trading binary option can be said as fixed return options . It is said so because the fixed payment value and predetermined. As a trader, you only need to determine the direction of price movements of the assets you have selected. Assets that you can choose include commodities, stocks, forex, and so forth. You do not have to worry about stop loss, risk / reward ratios, and so on.
Through simple understanding above can be understood that binary option can be regarded as the most simple and easy to do. The payment amount is predetermined and a trader focuses only on the agreed profit or loss.
In the transaction process, there are about the type of binary option that you can trade. Knowledge of this type of binary option is very important for you to understand who plans to enter and start trading.
Here’s more discussion.
1. Binary Option High / Low
The first type of binary option is included in the simplest type and most often traded by beginners. In a high / low binary option, a trader can place options according to his estimates whether to go up or down.
When going to transact, a trader will determine the direction of movement at an agreed time. If the trader predicts the price will rise, then the trader’s position will have a High or Call option. Conversely, if the trader predicts the price will go down, then he can take the position of Low or Put.
Binary Option High / Low is also divided again based on the determination of profit or loss of Cash or Nothing and Asset or Nothing.
Cash or Nothing
In this condition when the time is up and the estimate of a trader is right or in the money, it means that the trader will get profit as predetermined. Each broker has different repayment terms between 65% to 80% of the funds invested.
When a trader is wrong in estimating or out of money, then the trader will experience the loss of funds that have been invested. When this happens usually brokers will pay back 10 to 15 percent of the funds you invest.
Asset or Nothing
Well, this type of binary option has a more flexible amount of profit because it is not fixed from the specified amount. So a trader who is in the money, then he will get a profit in accordance with the last price level at the time expiry or expiry.Looking at the above understanding, it can be understood that this type of binary option is almost the same as forex trading is determined by price changes.
The most interesting thing about this type of binary option is the calculation of unspecified losses based on the price level when the binary option position is closed. Even if the price moves in a direction that does not match the position, the losses you get will not exceed the investment.
Thus, this type of binary option enables a trader to gain unlimited profit with limited risk.
2. Binary Options Touch / No Touch
In this type of binary option, traders will determine a certain price level that will be used as touchable or touch target before the end.
A simple example like this EUR / USD pair is moving with a bearish trend in the range of 1.3500-1.3400. When the currency pair is expected to be bearish, trader will open the no touch option with the 1.3600 level. Vice versa, if a trader believes that before time runs out the price can touch 1.3450, then he can choose the touch option with such a level.
In determining the amount of profit and loss, this type of binary option follows the principle of cash or nothing. When in the money, the trader will get the profit as predetermined. Vice versa, when out of money, the trader will lose the amount of funds he invested in the choice.
If you take the option touch, then the condition in the money when the price touches the target level before the end of the period. Similarly, the position will out of money will occur if the price has not touched the target during the expiration period.
Double Touch / No Touch
Actually this type of binary option is not too much different from the touch / no touch. The difference is only in traders need to determine 2 price levels as the target. So when you have expectations the price can touch 2 levels, then traders can choose the option double touch. If the trader estimates the price will not touch 2 certain positions, then can use double no touch.
3. Binary Options In / Out of Boundary
Binary option type in / out of boundary is a type that is provided by many brokers. Well, this type of binary option is very suitable for use by sideways strategy users who rely heavily on support resistance.
When it opens the In Boundary option, the trader needs to determine the 2 levels that are believed to be upper and lower bounds of the price . If the price does not go from the limit until the end, then the trader will be in the money and will benefit according to what has been determined. If the price is beyond the specified limit, then trader will experience out of money. This means getting a loss of funds invested.
On the other hand, Out of Boundary also has almost the same principles. Where de traders need to determine 2 price levels that will form a range or boundary.However, the determination of profit and loss is slightly different that the new trader can get profit when the price is outside the range when the period ends.
4. Binary Options Turbo
In principle, the actual binary option turbo is the same as the high / low binary option, but what distinguishes it is the shorter end period range. Usually the period ends no more than 1 hour, even the lowest end period on the binary option can reach a count of seconds like 60 seconds and 30 seconds. Since this type of binary option has a high risk, the broker usually does not provide it.
That’s 4 types of binary options that exist and you can use in trading. Hopefully the information we have given above can add to your knowledge of all.