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Binary option trading is one of the easiest trading methods available to the new, inexperienced investor. This is because it does not require any great mathematical skills. In binary options trading, amounts are meaningless and numbers are not in the equation. All the investor needs to be able to do is decide if an asset will go up or down in value in order to make a profit. The amount of the increase or decrease is not taken into consideration. As long as the asset moves in the direction chosen by the investor, the investor will make money. On the other hand, if the investor is wrong, then he losses his investment along with a small percent of whatever is available in the account. For the layman who knows nothing about trading, they have a fifty-fifty chance of guessing right under any circumstances. Obviously, some research of the markets to trade in will only improve the odds.

In the binary option (fixed return options), the investor is actually entering into a contract to purchase a given asset at a fixed price, at an agreed upon time in the future. That time may be an hour in the future or a month. No actual purchase takes place; there is only the choice to buy and this option is relinquished once the expiratory time runs out, so someone else can do the real buying.

When compared to any other form of financial trading, there are several benefits of binary options trading besides its simplicity and straightforward method of trading. First of all, the risks are only as big as the investor chooses them to be. Very small investments can be made to minimize risks or, if one wishes, large investments can be made as well. The results are instantaneous because the investor chooses the trade expiry time. While a majority of the other markets talk in terms of days or months, binary options can be traded in durations of minutes if the investor chooses. Normally, one hour intervals are fairly common. The binary options are generally conducted through a web-based environment; this means it offers the convenience of carrying out trades from any PC or even a smartphone with internet access. With proper research before conducting trades, the potential to make good money is there.

The drawback of such trading is that like in any other form of trading, without proper preparation one can lose vast amounts of money. This is further aggravated by the fact that because binary trading gives a casino-like, or game playing high, one can lose money without realizing it. This is compounded by the ease with which this trading is available from the home at all times of the day or night.

Here's an example of how binary options work. An investor puts a binary call option on oil, with a 70% return rate. When the call is placed the rate of oil is 65.9001, but at expiry time it goes up to 65.9002. Since the price has increased, the “money is in” and the investor gets his $100, plus the interest of $70.00. If the rate would have gone below the $65,9001 (the rate when the call was made), then the option would have expired "out of the money" and the investor would have lost.

Should the investor choose the binary put option (meaning the trade will be lower than the current rate at the time of expiry) and the trade closes at 65.9000, then the investor was right - the money is in and the investor collects the agreed 70% return. If, however, he was wrong, then there is no payoff. The beauty of binary options is that the investor knows exactly what the potential earnings are going to be and how much they stand to lose. This makes binary options safer than other trading options, because the investor has full knowledge of how much they stand to gain or lose before any trading is done.

Just like with other forms of trading, binary options trading requires a broker. There was a time when such brokers required high fees, however, today one does not have to pay for a binary option trading account. In fact, most brokers provide traders with a demo account, in addition to the free platform to trade on, so the traders can practice using the platform before any money is deposited. A good broker should provide a good sized range of assets for the trader to select from – assets like stocks, commodities, forex currencies and bonds, thus allowing the trader to have a balanced portfolio with a variety of markets.

It is important to pick a binary option trading platform that is easy to use and is not complicated. Also, shop around for special offers. While not all brokers offer bonuses and special offers, some of the more competitive ones offer anywhere from $250 - $1000 when a trader signs up for a free account. Take a look at the maximum and minimum investment conditions. In case one is not a big player, then it is important to have a broker who will to let the investor deal in small amounts. Study the returns a broker offers; some brokers give higher returns on “in the money” investments, while others give some returns even on “out of the money” investments. Lastly, brokers should provide the most progressive customer services and support. They should be accessible in times of general or technical problems. Also, make sure all sign-up costs and commissions are carefully understood.