Binary options trading is easy and simple to understand and execute but having knowledge of the basics is very important. Without a proper understanding of the commonly used trading terminologies it would be a bad move to start trading in the binary options market as you would have no clue what is going on.
One of the most fundamental term which you would come across very frequently is the low option.
In binary options trading low option is one of the most used trading option.
It basically refers to a decline in the price level of an asset. An asset can be anyone of these: stocks, forex, commodities and indices. When you select the low option you are making a prediction that the price level of the asset selected at the point of expiry will be lower than the current price level i.e. the price level of the selected asset will fall.
Low option can also be presented as the Down option by some binary options brokers. There is no difference between the two terms as far as binary options trading is concerned. Low option can be traded in various trading modes like High or Low (sometimes also offered as Up or Down), 60 seconds, option builder etc.
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How to trade low option
In order to trade the low option first of all you need to log into your binary options trading account and navigate to the trading platform of your binary options broker.
After this select a mode of trading which has the low trading option like High or Low, 60 seconds etc. Now you need to select an asset whose price you think will fall. You can make use of binary options signals or binary options market analysis to find such an asset. After this enter the amount you want to trade and select an expiry period.
Note that you can’t select the expiry period for 60 seconds trading as it is one minute by default. After this just execute the trade.
A percentage figure corresponding to the asset indicates what percentage of the invested amount you will win if your prediction is correct. If your prediction is correct the profit along with your originally invested amount will be added to your trading account. However, if your prediction is wrong, you will lose the amount you traded.
Dynamics of low option in vanilla trading vs binary options trading
In vanilla trading you can’t make money by trading the low option directly. One way to make money in vanilla trading using falling prices is to wait for the price level to reach a low level and invest money in anticipation of recovery of the price level.
In binary options trading you can make money even when the price of an asset is falling using the low option. The magnitude of the difference between the strike price and the expiry price doesn’t matter. It your prediction is correct you earn the same profit regardless of the difference.