When to buy puts, and when to buy calls, are the same in binary options trading as in trading regular options. The difference is in the potential profit. How do binary options work regarding profits? This depends on the kind of binary option. Binary options come to two varieties. There are cash or nothing binary options and asset or nothing binary options. In the case of a call option, a cash or nothing binary option pays a fixed amount of cash if the terms of the contract are satisfied. An asset or nothing binary option pays the price of the stock if the terms of the contract are satisfied. If the stock has moved up substantially in price the asset or nothing option more closely approximates a standard option in that the payout is better. The limiting factor of this situation is that the individual does not receive the option to purchase stock, which is what a call option allows in standard options trading. If the stock price moves above the strike price, the option is then in the money and executing the trade will be profitable. However, if the stock moves substantially higher the trade will be extremely profitable. In the case of cash or nothing binary options the individual receives the same amount no matter how high the stock rises. Only in asset or nothing binary options does the individual receive the price of the stock as payment. However, the standard options trader may choose to hold on to the stock to see if it goes higher. This is not possible in binary options trading, even in asset or nothing contracts, because the individual receives cash and never sees a share of stock.

How do binary options work as far as profits? In each general class of options trading, profits come from accurate reading of how a stock price will progress in the market. How do binary options work as far as investment risk is concerned? If the individual is buying call options the situation is similar in both classes of options trading as the only loss is the price of the premium paid to purchase the option in the first place. How to trade options, standard or binary, will depend upon how involved the trader wishes to be in the market. Binary options are somewhat limited compared to standard options, but for many investors less complication may be more attractive.

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However, it is also no secret that achieving consistency within the Forex market requires a lot of preparation (you need education and reliable trading tools) because not only you need to have a good idea of where the price is about to move, but also how far it is going to go.

For instance if you are trading the EUR/USD pair and you decide it is a good idea to go long, you would place a “buy” order, because you are expecting the price of the Euro against the dollar to go up.

If you placed your trade using 1 mini lot (this equals $1 profit for every pip), and your target for that trade is 30 pips, you would need to have at least $1,000 in your account to meet margin requirements and allow some room for drawdown, and if the trade is successful you will make $30 in profits.

However, in order for this to happen the price of the Euro has to move 30 pips against the dollar, otherwise you will not reach the intended target and realize the profits. As you can see, if you trade the Forex market using the traditional approach you will have not only to predict where the price is going, but also how far it is going, which simply makes it twice as difficult.

Now, if you have $1,000 in a binary options trading account, what would you need in order to place a successful trade, and moreover, what kind of profits a successful trade would deliver for you?

In order to answer this question, let us assume that the price of the EUR/USD is at 1.47849 and based a given analysis of the market (e.g. swing trading pattern recognition) you think that the Euro is trending up against the Dollar.

In this case you would go long as well, but instead of placing a “buy” order for currency, you would simply buy a $100 call option for the EUR/USD pair with a 1 hour expiration. If you are right and the  price goes up, even if it is only 0.001 pip above the price you purchased your call option (which is the strike price), and it remains there or above until expiration, you would get as much as 75% return on your $100 investment.

In other words, a single $100 trade could easily deliver $75 in profits and you could repeat this process several times during the day.

But the remarkable thing here is that you did not need the price to go up 30 pips in 1 hour to get a 75% return on your investment, you only needed 0.001 points of variation to achieve this.

In this scenario you certainly had to determine in what direction the price was going to move (this is usually an ingredient of the trading process) BUT your forecast did not have to take you all the way to a 30 pips increase in the price in order for you to make get the expected return, because you got it with just 0.001 points of variation, and you made $75 instead of $30.

Also, you can open a binary options account with only $100 and you can trade with as little as $30 with no commissions charges.

So as you can see, the potential of Forex trading through binary options is huge and the process is far simpler thus increasing your chances for profitable trades, however, you do need to have a sense of where the market is going. Provided that you have this, you are likely to make take far more winning trades than losing ones and a lot more money as well.

Binary contracts are, like the name implies, bi-polar. Either you choose the “up” direction or the “down” direction. You might think of it similar to any two-sided choice – yes or no, true or false, heads or tails, on or off. In this case the binary switch refers to up or down movements in a stock, currency, or index.

How it works is that the investor with a binary options trading account picks one of the available securities to trade (not all securities are traded… only the highest volume securities are traded this way) and selects how much to invest. Once the amount to invest is selected the investor must choose which direction the security will go, up (choosing “call”) or down (choosing “put”). The trading software computes the payouts (also fixed based on the contract) and if satisfied with the contact, the investor submits the order.

The really fascinating part about this sort of transaction is that it does not matter whether the stock moves… the only thing that matters is the direction. The payout at the end of the contract is the same whether the security jumps a nickel or twenty dollars. If the binary option trading contract is for a 75% payout on an up movement of a security on a $100 investment and the stock is up even just one cent at the expiration of the option, the investor receives $175 ($100 invested plus $75 profit). Options expire typically hourly so a successful trader can execute many contracts every day.

To summarize, this binary option trading strategy: Contracts have fixed expiration (hourly) – and can’t be sold prior (although it is simple enough to simply make another contract with the same expiration Trades require the investor to choose only how much to invest, which security, and which direction.

This is one method to explore.

However, even if that plan is a good one, day trading for consistent profits poses a great challenge, because when you set out to buy and sell stocks (or any other instrument) for a quick gain, not only must you be accurate at predicting the direction of the movements in price, but also you must determine exactly how far is the price going to go in that direction.

Certainly, if you buy a stock intending to keep it for a couple of hours and then sell it for a profit, it will not do you much good if you buy it at $10 and then you have to sell it at $10.15, because in that scenario maybe your will not even be able to cover the commission costs.

The fact is that “guessing” the direction of the price movement can be relatively easy, because there are many patterns that usually repeat themselves, and if you can recognize them you will likely be right most of the time.

However, the tricky part is knowing how far the price will go in that direction, and this is what can really hurt your chances of day trading profitably, because if the price does not move as much as you expect, you may end up getting returns that might not even be enough to pay for commissions.

So how do you go about day trading in a way that is easier and at the same time offers the possibility of higher and more consistent returns?

Well, instead of trading stocks, currencies or commodities, trade binary options on those assets. Why?

Because binary options can deliver as much as 81% returns within one hour -in a single trade- and you will not have to pay commissions, nor you will need to have a $10,000 account to start trading profitably.

In case you are not familiar with this product, binary options – also called digital options or “all or nothing options” – are a type of option where the payout is fixed, meaning that if your contract ends up in the money, even if only by $0.001, you will be paid a fixed return (which can be anywhere around 65%-81% depending on the underlying asset).

This options expire hourly as well as daily, so you can buy call or put options and realize a 81% profit within 60 minutes of having entered the trade, which is certainly a day traders dream come true.

But the best part is that in order to achieve this return you only need to determine the direction of the price movement and NOT the magnitude of such movement, so imagine that you where thinking about buying $1,000 worth of Intel shares at $20, well:

If you would have purchased $1,000 worth of Intel shares and the price would have gone all the way to $20.70 within a couple of hours, well, you just would have made $35 minus $14 in commissions, which means about $19 in profits.

On the other hand, if you took a $100 (not a $1,000) trade on Intel binary options, and the price went up not to $20.70 but merely to $20.02, you just would have made 72% (fixed return for this instrument) which means a net profit of $72 instead of only $19, and you just did that with a 2 cent price movement in your direction.

So as you can see, binary options are far simpler and definitely a more profitable way of day trading, because you can actually make more money with intraday trades by risking a less and without having to predict how far the the price will go, as just having a good idea of its direction will do the trick.

Indeed, in order to make a profit trading stocks not only you need to be sure that the price is going to move in a given direction, but also, you must be right about the magnitude of such movement, because if you go long on a stock which is trading at $5 and it goes up to $5.05 you will not even have enough to pay for the commissions if you are trading with $500 account.

One of the problems is that in order to make a profit not only you must be right about where the price is going, but also about how far is it going, and the fact of the matter is that determining the direction of the price within a particular time frame is relatively easy, but assessing accurately how far is it going to go is really the hardest part of the equation.

Add the fact that each time you enter and exit a trade you have to pay a commission of around $7 to even $15 per trade, and you are already $14-$30 down on a trade the minute you place it.

If you are trading with $500, and you make a good trade (meaning that you successfully predicted the price movement as well as its magnitude) you might have gotten lucky and snapped a 10% increase in the price of the stock within a few days, which would be a really great trade.

In this scenario you would have earned $50, but before you can cash in you have to deduct the commissions you had to pay, which would have been around $14-$30, meaning that your actual profit ended up around $36-$20 which is about 4%-7% return on that particular trade.

However, it is unlikely that you will always snap 10% gains on a particular stock, because what will usually happen -even if you are very accurate predicting the market movements- is that you will make a good share of mistakes, and even when you are right, the stock will not always move as much as you would have expected in the direction you had planned.

Therefore, in order increase your chances of being profitable and growing your account, the best way to trade the stock market is through binary options. Why?

Well, because binary options allow you to trade in smaller sizes without having to worry about commissions, you can achieve returns around 70%-80% on each trade, and in order to do so you only need to be right about the direction of the price, regardless of the magnitude of the movement.

Indeed, when you trade binary options (also called “all or nothing options”) the payout for each call or put option is fixed, meaning that unlike traditional options, your profit will always be 70%-80 of the invested amount regardless of how many points in the money you are, as long as you are in the money even if it is by $0.001.

On the other hand, binary options offer the advantage that they can be traded hourly, meaning that you can buy contracts that expire within 60 minutes thus allowing you to realize 70%-80% profits fast (something simply impossible to achieve trading stocks in the traditional fashion).

This certainly makes it easier to make a profit trading the stock market, because on one hand, all you need to do is determine the direction of the price movement, and on the other hand, you can get a far higher return on your investment without having to risk 100% of your account.