What are binary options Trading?

In principle, trading a binary option is a super-simple process. Or, at least, it should be.

All you should do as a trader is to guess the direction of a market or financial product. Namely, if you think the price of an underlying security will move to the upside, then you should trade a call option.

On the other hand, if you think it will fall, you’ll trade a put option. Note that you can only buy an option. A put for a bearish setup and a call for a bullish one.

When compared with Forex trading, the difference is that a Forex trader buys or goes long, and sells or goes short. Still, he/she needs to give the general direction.

Moreover, when it comes to binary trading, traders must set an expiration date. In fact, a binary option has two elements traders need to decide upon: the striking price and the expiration date.

No only traders need to indicate the direction (that’s the entry price or the striking price), but they need to indicate a point in time when the option will expire.

In plain English, a point in time when the comparison between the striking price and current price will be made. Based on the outcome, it is said that the option expires in the money or out of the money.

The pros of trading binary options come from the simplicity of the product. Moreover, with a sound money management plan and avoiding short-term expiration date, trading binary options is a nice way to diversify a portfolio.

Unfortunately, the cons overcome the pros. Because traders need to indicate the time element. The holy grail in trading is price and time, and binary options include them both.