The youngest of financial instruments, which has recently gained explosive popularity and entailed both the creation of specialized narrow-profile companies to trade only them, and the inclusion in the list of instruments in some of the existing brokerage trading platforms. It will be about binary options (financial betting).
What is a binary option (hereinafter referred to as BO)? The binary option operates on the principle all or nothing. The trader is betting on which direction the price of the underlying asset will change (it will decrease or grow, or remain in the range). He chooses the direction of this change, determines the time during which this change is likely to occur, as well as the size of his bet, on which his profit margin directly depends. Here is a very brief about the principle of BO.
BO features are:
payment system. The trader always makes a profit less than the bet made by him (usually within 70% of the bet amount);
automatic regulation of the amount of loss it cannot be more than the size of the bet made;
the amount of change in the price of the asset to the amount of remuneration does not matter, even when changing by one point, but to the side the amount of remuneration chosen by the trader will be the same as when changing by 1000 points.
So, what is a BO an option that, depending on the fulfillment of the agreed condition at the agreed time, either provides a fixed amount of income (premium) or does not bring anything. It is obviously necessary to start with the fact that this instrument has not yet received official recognition from the leading regulators of the FOREX industry. Further technically, the time factor plays a role here no less than the price change itself. This is due to the peculiarity of corrective movements in the presence of a trend. They always occur more sharply than a smooth trend movement. As a result, the correct direction of the price change can be nullified by a higher order correction. This, as well as the ratio of the rate profit / loss more like a game than trade.
Advantages and risks in the trading of BO. Risks include non-recognition by leading financial regulators and some technical subtleties in displaying quotes on platform charts by broker companies that represent liquidity in trading in BOs. The advantages are simplicity (at least visible) when executing transactions, ease of opening accounts, and a known result of a transaction, which makes the process of waiting for a result much easier psychologically.