Digital options are a revolutionary new way of trading. Allowing for higher profits, a quicker learning curve, and a risk-free start, the digital option have become the favorite of many successful traders.
In this article, you will learn:
- What is a digital option,
- Why trade digital options, and
- How to get started with digital options.
With this knowledge, you will be able to start trading digital options yourself, joining one of the fastest growing market on the internet and a high-potential environment.
What is a digital option?
Digital options have revolutionized trading by adapting a simple principle from computers. (Hence the name.) With the digital option, everything is either 0 or 1 – you make a prediction about what will happen, and if this prediction comes true, you win your option. If not, you lose it. Because of this logic, digital options are often called binary options, as binary describes the system of defining numbers by 0 and 1.
You can make a number of different predictions. The most popular type of prediction is that the market will rise or fall over a given period of time, but you can also predict that the market will reach a certain price level, or that it will escape from a certain price corridor.
This revolutionary new way of trading has two main impacts:
Main impact 1: Even small movements create big profits
With digital options, there are no nuances. You are right or wrong, but it is unimportant how right or wrong you are. Before you invest, your broker defines the payout it would offer you, and if you win, you always get that payout.
Compared to conventional assets such as stocks, this is a huge difference. With stocks, it matters how right you are. If you predict that a stock’s price will rise, and the price will rise by 1 percent, you will make a profit of only 1 percent. If the assets stock rises by 10 percent, you will make a profit of 10 percent. How right you are decides your success.
With the digital option, you would get a payout of roughly 70 percent for the same prediction. If the asset rises by 1 percent, you will get a 70 percent payout; and if the asset rises 70 percent, you will get a payout of 70 percent.
Main impact 2: Because small movements are enough, you can trade shorter time frames
Since it is unimportant how far an asset’s price will rise or fall with digital options, you can invest on much shorter time frames.
The main reason why traders of conventional assets invest based on long time frames is that they need large movements. Once any movement is enough, however, it makes sense to invest on shorter time scales and increase the number of your trades – more trades equal more money.
With digital options, you can do exactly that. Digital options use predefined expiry times from 60 seconds to a few months, but the most popular expiries range from 30 minutes to a few hours.
Why trade digital options?
There are good reasons to trade digital options. Compared to conventional assets, digital options have these three distinct advantages:
Advantage 1: Make more money
Digital options offer a much higher earning potential than conventional assets. With stocks, for example, making a ten percent return per year would be a great success. In bad years, you would be happy to break even. With digital options, things are different for these reasons:
- Digital options allow for steady growth. Digital options allow you to make hundreds of trades a year, if not thousands. Consequently, you make money more steadily and will rarely go from a good year to a bad year. If you know what you are doing, you can turn a profit every year.
- Your profits will accumulate. Even an average profit of 1 percent per trade will result in a profit of 270 percent of 100 trades – and many traders place that many trades in one week.
- Digital options allow you to invest in rising and falling prices. Regardless of whether the market is going up or down, you can make money with any movement. Consequently, you will never face a crisis where making money is impossible.
- Digital options are morally neutral. While there are other forms of trading that allow you to invest in rising and falling prices, these types involve selling the asset before you buy it. In a crisis, these types of assets will intensify the downwards pull on the asset and can ruin companies or exchange rates, thereby potentially causing many people to lose their jobs. With digital options, you face no such problems. Your investment is entirely between you and your broker, and it will not affect anybody else.
Advantage 2: Get quicker feedback
Because of their short expiries, you will quickly know whether what you do is working for you or not, and you will be able to grow and develop as a trader much quicker.
Imagine trading with conventional assets. You buy a stock, hoping that it will trade higher 10 years from now. Now ten years have to pass before you know whether your decision was right or wrong, whether what you are doing works for you or not. For most people, this is much too long. They panic after one year, sell everything, and never know whether or not they could make a good investment.
Having to wait a decade for a response to our actions simply conflicts with human nature. Before you have learned how to trade stocks well, you will be 80, if you ever learn it.
Some people stumble from one stock fiasco to the next and never learn anything. While they might spend their entire lives losing money, they only make ten trades in this time, which is why their losses are hardly surprising – how well did you throw a football on your tenth try? Any skill takes time to develop, and with conventional assets, there simply is not enough time.
Digital options, on the other hand, allow you to complete a trade within a few minutes, a few hours, or a few days. You get much quicker feedback, and you will quickly know whether what you do works for you. Consequently, you will be able to learn much quicker, and you can become a skilled trader before you reach old age.
Advantage 3: Getting started is so easy
If you plan on using the advantages of digital options to make money yourself, getting started could not be easier. Where conventional assets require you to invest your hard-earned money without knowing what you do, digital options provide you with a way to learn to trade before you invest.
This way is a demo account. Demo accounts work exactly like regular digital options accounts but allow you to invest play money instead of real money. With these accounts, you can learn trading like a professional in a risk-free environment. Once you know what you are doing, you can switch to real money trading and turn a profit from the start.
Compare that to the many people you know who lost money by trading stocks before they knew what they were doing, and you understand why digital options are such a booming industry.
Digital options are a revolutionary new way of trading. They allow you to make more money, and they introduce you to their trading style in a risk-free way. This offer hardly has any disadvantages. You either find your way to financial freedom or you have not lost anything.
To try digital options now, take a look at our top list of the best digital options brokers, and pick the broker you like best.