- 5 Oct 2022
- Reading time
- 5 minutes
There is hardly a sphere of life that the “crypto tsunami” has not hit. Binary options trading is not left behind. With the recent buzz and attention around cryptocurrency and margin trading, traders and market enthusiasts are finding the connection between both.
It is on this premise that this article seeks to identify the core of binary options, how to trade binary options and how to trade binary options using cryptocurrency successfully.
What Is Binary Option?
A binary options trader is expected to guess whether the price value of their (chosen) underlying asset will increase or decrease. As a Binary options trader, one of the tips to succeed in your trading is to understand how to trade cryptocurrencies on BinaryOptions.com.
When trading Binary options, you are trading simplified option contracts with a fixed reward and risk. As a binary options trader, you need to pick an underlying asset, stake an amount and predict which of the two possible outcomes will pass in a time frame.
The goal of every trader is to make correct predictions. If your predictions are accurate, you will get your staked capital with an additional bonus of 70% to 85%. However, for wrong predictions, you will lose your staked capital.
How Do Binary Options Work
Binary options seem simple but are highly risky and require in-depth knowledge of your underlying asset and the market (in general) to succeed.
Binary options trading works around three key elements. They include:
The Underlying Market
For every trading or investment round, you need to pick an underlying market. The market contains your assets, and you need to understand the market before making predictions. It is in the financial market where your asset lies.
The Strike Price
The strike price is the point where you think the value of your prediction should go above or below. In binary options trading, you are expected to predict whether the price value of your underlying asset will move above or below your strike price.
The Expiration Period
The expiration date and time in binary are the duration of your prediction. That is the time after which your prediction becomes right or wrong.
What Are Crypto Binary Options?
Crypto Binary Options is a trading form or arrangement whereby you predict the rise or fall of cryptocurrencies over time. After staking your capital and completing the requirement, you wait for the expiration period. If your prediction comes true, that's a successful trade. Otherwise, your investment is gone down the drain.
Binary options in Crypto are quite similar to every other trading options market. The only difference is the choice of the market and underlying asset. For instance, the use of crypto tokens and predicting the rise or fall over a period.
However, there are peculiar options in crypto binary trading (that are limited to crypto binary options trading alone). They are the “in the money” option and the “out of the money” option.
Both options have a specific payout you can earn at their expiry date. That is, you can still earn a certain amount whether your prediction is right or wrong.
In Crypto binary options, Bitcoin remains the most traded asset, followed by Ethereum and Litecoin. Until recently, only a few brokers offered these trading assets and allowed you to make predictions over them in the market. Today, it is a criterion for choosing a binary options broker.
How Cryptocurrencies Work
Cryptocurrency is a digital asset you can own but can not see or touch. Whatever amount of cryptocurrency that you have, is permanently written in a public ledger and stored on the blockchain.
Every transaction in cryptocurrency is encrypted. The exchange of value and crypto assets occurs between network participants on the blockchain. The blockchain is a decentralized platform, and it is the technology behind how cryptocurrency works.
In cryptocurrency, the blockchain plays a crucial role. It ensures the security of your wallet and transactions. It also maintains a decentralized record of transactions. The blockchain is central to the operations of cryptocurrency. It is the distributed ledger technology that ensures transactions can not be altered, deleted, or destroyed.
How To Start Trading Bitcoin Binary Options
Crypto trading in binary options is now getting more popular by the day. This is because people are now more aware of crypto trading and have found it a profitable venture. Most traders prefer Bitcoin being the major crypto asset. It is, therefore, expedient to explain how you can engage in Bitcoin binary trading.
If you want to start trading Bitcoin binary options, you should follow these procedures:
Choose A Crypto Binary Options Exchange
The first step is to choose a platform for your trading and investment. It is interesting to know that there are no separate platforms for Bitcoin binary options. You can use a single platform for other underlying assets, such as stocks and commodities, to trade crypto binary options.
However, ensure that exchange platforms are reliable and trustworthy. Check that they are regulated and that your funds and investment are safeguarded. A positive user review and a long-standing record of such an exchange platform are important.
Furthermore, some trading platforms have mechanisms in place to allow you to recover the money lost to binary options. You should choose them instead.
Research The Crypto Market
Binary options trading is based on predictions. So while you might be lucky to make accurate predictions, it is important to have in-depth knowledge of the market. Proper research will keep your predictions highly accurate, and you will stand a better chance of succeeding.
If you want to start trading bitcoin binary options, ensure you research the historical price patterns of the major coins, such as Bitcoin, understand the factors that could affect the price, and always stay updated with the online market sentiment. Especially on social media.
Opening A Crypto Binary Options Contract
The next procedure after selecting your preferred broker and researching the market is to open a binary options contract. You can create a new account on the exchange platform, choose your target asset and open your contract.
You can either transfer fiat from your bank account and convert it to crypto or use exchange platforms that allow you to deposit via cryptocurrency. The remaining procedure is to set your strike/ expiry time, stake your contract and wait till your contract expires to cash out or count your loss.