How To Quit Your Day Job & Earn Your Livelihood Using Binary Options Trading?
You might have come across several different types of speculative investment options available in the market ranging from equity, derivatives, and bonds to futures, forwards, etc. But there is one kind of investment option that is different from the rest. That investment option is binary options. Binary options are different because unlike other types of investment options, these have a fixed return and risk associated with them. This is the reason why more and more people these days are opting to invest in the binary options market. Let us take a look at how binary options trading can help you earn a decent living and help you realize your dream of quitting your day job.
The thing with traditional investment options is that you require a large amount of initial capital to actually make a decent living from it. This is primarily because of the fact that the returns are low (generally 10-20%) and the risks are high. This is not the case with binary options. In most binary option deals, the returns are fixed at almost 60-70% of your invested capital. Hence, you can very quickly make enough to survive upon without subjecting your money to a lot of risk. Also since returns are high, you need to make lower number of trades to get to your target, which in turn reduces the risk of losing money in the market.
Another thing is that binary options are rather than easy to trade in as compared to stocks or derivatives. You do not need to keep into account the large number of variables which might change and have an impact on your returns as you would if you invested in other speculative instruments. This makes it easy to plan out how much you need to earn in the market and how many trades would you have to make in order to reach that target. This kind of thing is not possible if you invest in any other kind of speculative investment option.
One more thing that makes it easy to make a living off binary options trading is that you can make use of highly effective risk management strategies such as hedging and diversification to minimize your risks. This ensures that if your trade is going to make a loss, then the loss amount is very low and you are encumbered by the weight of the losses that have made on trades. This is seldom possible in other investment options since loss and risk are not quantifiable and are often unlimited in nature.
Thus it is quite easy to say that binary option trading can be a great method to generate a second income or completely replace your primary income and help you quit your day job. But, one thing that needs to be understood is that like every other income from investment needs sustenance by the use of specific principles, income from binary options trading would have to be sustained with in depth market research and analysis; defined investment strategies; and above all a tried and tested money management policy. It is only after these things have been accounted for you should consider income from binary options trading as a replacement for your primary source of income.
Top Tips For The Greenhorns
Binary options trading is a great way if you are looking to earn a little extra cash or make lots of bucks when you are an accomplished trader. Today, the binary option trading is gaining popularity among people and thousands are making lots of money even without an in-depth knowledge of this subject. One thing you need to know is that even as you are looking to employ binary options trading so as to make money, it is not just a stroll in the park. Here we have compiled some tips to help you minimize risks and make lots of money if you want to go the binary options trading way. Always remember though that besides getting a technical grip on trading, you must have fun while trading. This way, you will be naturally inclined towards the trading and make better trading decisions.
You need to look for a good binary options broker who knows what they are doing in this field. It is even easier to look for a reputable broker online. Just search through a few websites and you will find one who is ready to work with you and even make this trading a success.
Don’t Over Invest
In order to reduce your risks, it is prudent to resist the urge to over invest. There is nothing wrong with trying to make that one big score, but it is imperative to employ some self-control as this can be a game-changer. Beginners lose money because they are tempted to over invest. As a beginner, you are advised to invest with courage as well as rational thinking.
Learn As Much As You Can
You need to increase your knowledge in this field and also know that there is always something to learn each day. In fact, you need to enrol for binary options trading courses that have been made available for new traders. You can also discuss with other traders and read useful books about this matter. One thing you should know is that binary options trading is a continuously evolving experience, thus knowledge on this matter is always expanding.
Long Term Trading
Trading long term gives more and better returns and because binary options trading is a long term activity, you need to develop a good long term plan for this matter. Also, make sure that you don’t get lured into fads that won’t fit into your overall strategies. You need to stick to your plans and make sure you do so strictly.
Watch The Market
Prep yourself before you start trading in binary options. It is imperative to study the market and view graphs over time so as to predict the behavior of binary options asset and make well informed decisions. You don’t want to just sit there and wait for the goodies, it is healthy to study the market, involve your broker and even talk to a few other traders.
Follow The News
You also want to keep yourself updated with the trading news. Keep your eyes and ears open in order to catch the news about the condition of the market. If you do this, you will be able to understand the root cause of market happenings and also be in a good position to corner the market whenever it crashes or rallies.
An Example of Binary Option Trade
A trader who thinks that the EUR/USD strike price will close at or above 1.2500 at 3:00 p.m. can buy a call option on that outcome. A trader who thinks that the EUR/USD strike price will close at or below 1.2500 at 3:00 p.m. can buy a put option or sell the contract.
At 2:00 p.m. the EUR/USD spot price is 1.2490. the trader believes this will increase, so he buys 10 call options for EUR/USD at or above 1.2500 at 3:00 p.m. at a cost of $40 each.
The risk involved in this trade is known. The trader’s gross profit/loss follows the ‘all or nothing’ principle. He can lose all the money he invested, which in this case is $40 x 10 = $400, or make a gross profit of $100 x 10 = $1000. If the EUR/USD strike price will close at or above 1.2500 at 3:00 p.m. the trader’s net profit will be the payoff at expiry minus the cost of the option: $1000 – $400 = $600.
The trader can also choose to liquidate (buy or sell to close) his position prior to expiration, at which point the option value is not guaranteed to be $100. The larger the gap between the spot price and the strike price, the value of the option decreases, as the option is less likely to expire in the money.
In this example, at 3:00 p.m. the spot has risen to 1.2505. The option has expired in the money and the gross payoff is $1000. The trader’s net profit is $600.