There is a new age investment choice out there today called binary options trading. In order to be successful in this type of investing a trader needs an experienced broker to help guide them. TorOption Broker is that guide that can help clear the muddy waters that surround binary option trading. Belonging to TorOption is a chance to be a part of a top rated trading platform. They provide an effective and simple trading system that is unbelievably functional. All of the charts, information, and instruments a trader requires are at your fingertips. Proper evaluation of the factors behind a trade makes for a successful trade. This information is available from TorOption, 24 hours a day.
There are a couple of reasons that this investment vehicle has grown over the past few years. Lack of stringent regulations, lower cost internet access and the simplicity of the concept have allowed binary option trading to become more popular over time. There is also the clear concept that a successful binary option trade will result in an excellent return on investment of 70%. The other side of the coin is that an unsuccessful trade results in a total loss. That is why it is important to gain a clear understanding of the risk-reward facts about binary option products.
Factors Affecting the Outcome of Trades
There are two major factors which dictate the outcome of every binary option trade. They are risk to reward ratio and win-loss ratio. First, the risk-reward ratio which in any trade is simply the amount of potential risk of losing money opposed to the potential gain. Most would probably look for a potential trade that has a 1:2 probability of reward. TorOption provides a decent choice in trading accounts along with top notch practical and realistic trading platform that will allow you to understand the ratios.
The win-loss ratio is also called the strike rate or success rate. It is expressed as a percentage and shows the likelihood of winning a trade. This figure is arrived to by looking at the past performance of an option. The calculation to figure out the win-loss ratio is taking the total number of winning trades and dividing it by the total number of trades over a particular period of time. For example, if a win-loss ratio is 70% then you can expect the binary trade to be successful 7 out of 10 times.
Some binary options brokers lure potential traders in by fudging the math and showing only the percentage of returns on a successful trade. That is not the case with TorOption Broker. They will provide you with the right information, allowing for educated trades. This is showing the potentially positive side while ignoring the risk and potential loss. When a trade is lost the entire investment is most often lost. Thus, the risk is high at 100% of everything invested and the return can range from 60-92%, depending on the broker used. The risk-reward ratio will never be 1:1. Understanding this will make binary option trading a more enjoyable experience. Using an experienced broker like TorOption Broker is a good step in finding the best return on your investments in binary option trading.
Some Examples of Risk-Reward
To make the risk-reward of binary option trading more understood here is an example. You are going to make a trade and the binary options broker you are using is offering 85% for any trade that is successful and comes in. You will stand to lose your entire investment if the trade ends “out of the money”. For this trade, the risk to reward ratio is 1:0.85. For each dollar risked by the investor, there is a chance to earn 85 cents.
That is why it is so important to understand the value of these types of trades. Many will entice you with a claim of 85% return but that totally discounts the risk. As you can see, making up for losing trades is going to take more than one successful trade so you had better be really comfortable with the risk-reward ratio that you have in place. Getting help from a professional like TorOption is a great move to get a better grip on the process. They provide a clear transparency in all of their transactions. This will clearly allow you to understand the risks and the potential reward.
Binary option trades are a decent way to make some money on your initial investment, as long as you understand clearly the nature of the trade involved. Binary option trading can be a great way to make money on your investment. Just keep in mind that partnering with TorOption Broker Broker is a great chance to have the knowledge of the binary option system and the confidence that you will be given all of the knowledge that you need to make successful trades.