How can day traders profit from binary options?

With their unique characteristic, binary options present a similarly unique set of advantages and disadvantages. Day traders can use the advantages to make their trading more profitable and trade unique new strategies.

Binary options make trading more quantifiable. Because you know the payout you will get in advance, make it easy for you evaluate each trading situation in terms of risk and reward. If you know that you will win trades based on a specific indicator 70 percent of the time, you know exactly which payout you need to trade this strategy profitably – roughly 60 percent. The next your indicator creates a trading signal; you only need to check whether your broker offers you a payout for the trader that is larger than 60 percent. If they do, you know that you will make money if you invest in these situations. With conventional assets, you face more uncertainty. You never know how much profit you can make, which is why creating a risk/reward calculation is more difficult.

Binary options make managing risk easier. With binary options, your risk on every trade is limited to the amount of money you invest. This is a fundamental difference to CTFs and other leveraged assets, where you potentially can lose more than you own if the market runs against you far enough. While providing a similarly high earning potential, binary options make it easier to manage your risk than other types of short-term investments.

Binary options allow new trading strategies. It offer many different trading styles that allow all sorts of new strategies. With one touch options, you can predict whether the market will reach a target price; with ladder options you can predict that the market will trade above or below a target price when your option expires, and so on. Each option type has its own unique risk/reward ratio, and the amount of strategies that you can build on this variety of trading styles is almost endless.

Binary options make trading easier. Banks have long offered assets that allow more complex predictions than stocks. With knockout certificates and the alike, you can make predictions that resemble trading styles. While these certificates allow somewhat similar strategies, understanding them and getting into a position where you are allowed to trade them is difficult. Consequently, they have been reserved mostly to professional traders. With binary options, however, even complete newcomers can trade complex prediction. You choose your trading style, the stock, indices, currency, or commodity you want to trade, and invest in rising or falling prices. The whole process could not be simpler. These four differences between binary options and conventional assets make a worthwhile alternative for some traders. To understand which traders can profit from using options, let’s now look at two examples.

Signe J. Petersen is an experienced trader of stocks, currencies, commodities and many more. In the wake of rising popularity of binary options trading.