There is a new investment instrument in town that everyone is talking about but I am not sure many people have understood it yet. The new kid in the block is binary options trading; which is being termed as a favorite for millennials who want to invest their money in high return asset classes. Binary options trading is done online on platforms such as 10trade.com and it gives you the flexibility and convenience of working from your comfort zone.

The concept behind binary options trading is purely the same with the concept behind trading involving your traditional derivatives such as futures and option contracts. A binary option has the same characteristics as any other derivative instrument in the sense that it is based on the prediction of the fluctuation of the price of an underlying asset. The underlying asset could be a commodity such as oil or cereals, currency, stock or an index tracking a specific stock or currency among others. When placing a binary option trade, you are essentially predicting whether the price of the underlying asset will go up or it will go down. Based on the outcome of your projection, you thereby gain or lose money.

There are two major types of binary options which are the put binary option and the call binary option. When you place a binary trade predicting a fall in the price of the underlying asset, then you are placing a put binary option. If your prediction turns out to be true, then you are in the money and gain; on the other hand, if your prediction turns out to be false, you are out the money and you there lose your initial investment into that particular trade. The call binary option is the exact opposite of the put binary option whereby you predict that the price of the underlying asset will grow. Under the call binary option, you are in the money when the price actually goes up as predicted; while you are out of the money when the price of the underlying asset falls.

To get involved in binary options trading all you need is go to a trusted binary options platform online like 10trade.com and sign up and create your account for free. Once you have the account you can start placing binary options trades on the different underlying assets being offered under your platform of choice. If for instance you place a put binary option trade of 85% for the value of $100, you stand to gain $85 dollars if the price of the underlying asset of your choice drops; and walk home with $185. However if the price of your underlying asset goes up, you lose your money and only get 10% of your initial investment which in a case is $10 only.

Every binary option trade you place usually has a pre-specified time period within which it can be exercised. At the lapse of that pre-agreed time, you review the price of the underlying assets for which you placed your trade and get to see whether you made money or not. All this is done online hence giving you the pleasure of doing it from any place at your own convenience.

The amount to be won in-case your prediction turns out to be true is also pre-determined and agreed upon before you place your trade. This amount is what is referred to as the strike price for the binary option. Another key characteristic of a binary option trade is that there must be an underlying asset whose price fluctuations is the subject of the binary option trade. Without an underlying asset then a binary option trade is non-existent!

To become a good binary options trader, there are a number of things that you need to keep in mind. On is the fact that just like in any other market, logic and thorough analysis drives decision making. You need to learn the art of separating your personal feelings and emotions from your investment decisions; and let a deep analysis of trends in the market guide your judgement. Following the major activities in the markets that might affect your chosen underlying assets is also very important in helping you understand how best to trade on that particular asset. Finally, you need to diversify your trades so that your risk is reduced in case of market shocks that go against some of your trades.