Many kinds of trades rely on outside market data to determine their outcome, but of all the varieties, binary options offer the most basic and straightforward format. A binary option offers only one of two outcomes. You either gain or lose. Binary options also feature fixed time limits, where in the end, your trade has either been successful, or not. Thanks to that simplicity, traders are attracted to binary options because they do not have to study the intricate ins and outs of international markets.
When a trader purchases a binary option, they are asked to decide which of two possible outcomes they find more likely. While plenty of traders do their research on market trends and news events, the limited range of a binary option does make it possible to test your luck and jump in with little to no background.
In general terms, there are three varieties of binary options, which all work in a similar fashion. With a digital option, a trader predicts if the price of a certain asset will rise or fall from its current market price within a set period of time. For example, a trader may choose a binary option predicting the price of gold will rise or fall in the next one hour. With a range option, a trader is asked to predict if the value of the chosen asset will within a set range by the set expiration, or not. Finally, with a touch option, a trader is asked to predict whether the price of a specified asset will touch a specific value at any point before the set expiry, or not. For example, a trader may be asked to decide whether the price of oil will hit a specific value within the agreed-upon expiration period.