With binary options, it is possible for traders to take advantage of gold price movements to make a profit. In this example, we will use the touch trading options to predict price movements of the gold asset. In this regard, the price of Gold has to hit the touch price for you, the trader, to win the trade. With the conviction that the price of Gold will hit the $1617.40 mark by 4.00 pm, a trader invests$100 in this trade using the touch trading option.


If this appeals to you because it seems like an easy way to make some quick money then think again. Whilst it is a relatively straight forward way to make money it also takes a lot of practise, understanding and a certain amount of responsibility. That said it is a great way to make some extra income or even make a full time living if you approach it with the right attitude.

Our advice to you is to determine what part of your bank balance you are ready to put on a single trade and stick to your decision. Most binary options traders stick to either 10% or 15%, but braver traders easily bet with $20-25 of their bank balance. Since you are a beginner, it is a better idea to trade with smaller sums of money, thus you can begin by trading with 5-10% of your budget. As you complete more trades and gain confidence and experience, you can start increasing the amount of money you bet until you reach a percentage that suits your needs. The CFTC and SEC have received numerous complaints of fraud associated with websites that offer an opportunity to buy or trade binary options through Internet-based trading platforms. The complaints fall into at least three categories: refusal to credit customer accounts or reimburse funds to customers; identity theft; and manipulation of software to generate losing trades. Therefore, your risk is$50 for each contract you trade. You are allowed to lose up to $110 per trade, so you can buy two contracts at$50. If you lose on the trade you will lose 2 x $50 =$100. This is below the $110 allowed. You can't buy three contracts though because that exposes you to a$150 loss. A \$150 loss is more than your established risk tolerance.

#### Binary options trading is a time-consuming activity. You must always read about the latest events in the global markets in order to keep up with the most recent information and updates. Experienced and successful traders usually trade with several assets and they rarely change them. This is why as soon as you learn how to trade binary options you should pick 5-6 assets that you think are the easiest to predict. Always read the news related to the assets in order to be able to react adequately in case the market news predict a drastic change in the price.

Binary options trading has one big advantage when compared with other trading possibilities. The outcome is calculated percentage wise. As such, traders can split the original amount to trade in various smaller units. Because the outcome is a percentage, the result is the same. Any binary options “how to” guide should start from splitting the risk as much as possible. This is called diversification.
Although everything written on this page is true, there are certain risks in binary options trade which you should know of. Even if you manage to win 50% of the trades you place, you will eventually be losing money, because the payouts are usually lower than 100%. You choose how much you can lose. If you make a deposit of let’s say 500 USD, you can’t lose more than that. That is an advantage compared to trading on forex, where your loss can exceed your deposited capital. With binaryoptions, this can’t happen. Please, do not deposit money that you can’t afford to lose because it is possible that this will happen.
In the standard Black–Scholes model, one can interpret the premium of the binary option in the risk-neutral world as the expected value = probability of being in-the-money * unit, discounted to the present value. The Black–Scholes model relies on symmetry of distribution and ignores the skewness of the distribution of the asset. Market makers adjust for such skewness by, instead of using a single standard deviation for the underlying asset {\displaystyle \sigma } across all strikes, incorporating a variable one {\displaystyle \sigma (K)} where volatility depends on strike price, thus incorporating the volatility skew into account. The skew matters because it affects the binary considerably more than the regular options.