Binary Options-A Powerful New Investing Tool
There is a new method for investing and trading that is much more powerful than the conventional methods like trading penny stocks or forex. This method is known as Binary Options Trading. Trading binary options is like making simple yes or no bets.
For example, you can bet on whether EUR/USD rate will fall below 1.3570 or whether AUD/USD rate will rise above 1.0000. Now, if your bet comes out right and EUR/USD rate does fall below 1.3570 or AUD/USD does rise above 1.0000, you collect your original investment plus a profit. If not, you lose the original investment that you had made in the trade.
The maximum you can make on a binary options contract is $100. So, if you predicted the market direction correctly you make $100 per contract and if your prediction turned out to be wrong, you lose what you had invested in the binary options contract. Now, the maximum payoff that you can make with one binary options contract is $100. If you win, you make $100 and if you lose, you make $0.
Let's consider an example. Suppose, the EUR/USD rate is 1.2380. Your charting analysis makes you believe that this rate could go as high as 1.2430 in the next few days. You want to bet on the direction of the market and the best way to do that is using a forex binary options contract. Let's make this clear with a simple example.
So, you buy one EUR/USD forex binary options contract for $7 that will expire in five days and has a strike price of 1.2430. If after five days, EUR/USD exchange rate is above 1.2430, you make $100 and if it is below 1.2430, you make $0.
So, instead you buy30 EUR/USD forex binary options contracts for $7 that will expire in five days and has a strike price of 1.2430. If after five days, EUR/USD exchange rate is above 1.2430, you make $100 on each contract or a total of $3,000 and if it is below 1.2430, you make $0.
And incase the EUR/USD exchange rate doesn't go upto 1.2340, you lose your $210.
So trading Forex Binary Options is a powerful new method of profiting from the volatility in the currency market that you shouldn't miss. Once you have made your bet, you don't need to continuously monitor the market. Either you will win or you will lose. Whatever, you can open a demo account and practice how to trade binary options before you take the real plunge! Good Luck!
Article Source: FxTradingStock.com
About the Author
Mr. Ahmad Hassam has done Masters from Harvard University. Try these Forex Signals by two top gun traders in a friendly competition. Discover these Forex Binary Options System that can give a return as high as 400% in just 1 day.
by: Ahmad Hassam
Total views: 24
Word Count: 420
Date: Sat, 11 Dec 2010
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