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One of the great features of binary options trading is that a broker’s platform usually shows the profit percentage that a trade will generate if there is a positive outcome and the original price direction, either a Call or a Put, turns out to be correct Pocket Option Kaise Khele . The percentages are consequently added to the original amount invested and the total amount is the payout for the trade . In this article, I will explain more about payout rates, how brokers calculate them and their importance to a binary options trader.
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Introduction Maid Honor Wedding Toast Examples
A return rate in binary options is the profit rate paid by the broker to a trader and represents a fixed percentage of the amount of a trader’s investment. As we have seen, in the event a trader correctly predicts the outcome of a trading contract, they will receive the initial investment together with the promised percentage of the initial investment based on the payout rate.
The following example explains how this works . Assume a binary options broker offers a trader the chance to predict that Apple’s stocks will end either above or below $200 by a certain expiry time . Assume also that the broker offers a payout rate of 85% . The trader predicts that the stocks will end above $200 and proceeds to invest a sum of $200 Pocket Option Broker Beezy Trade . If the trader predicts the outcome of the trade correctly, they be rewarded with the sum of $370; $200 representing the initial investment and $170 representing the profit based on the payout rate of 85%.How Do Brokers Calculate Profit Percentages?
Binary options return percentages are usually pre-established by the broker. Generally speaking, the easier it is to predict an option, the lower the payout rate will be, whereas, the harder it is to predict the outcome of an option, the larger the profit rate will be. The movement of commodities is usually easier to predict so for this reason, they offer lower payouts. Currency pairs are usually harder to predict and therefore offer higher return percentages. The average payout rate in the binary options industry tends to be around 85%.
The payout rate of binary options also depends on the type of the binary option due to the fact that some binary contract types are easier to predict than others. Thus easier options have lower return rates and more difficult contracts have higher return rates.
High/Low contract types are the easiest contracts available and simply require a trader to predict if the value of an asset will increase or decrease within a certain time frame. Hence, they offer the lowest payout rates. The most popular High/Low contracts offer payout percentages of 65 -95%. Although they pay out less than other types of contracts, they are easier to predict, thus ensuring a higher success ratio. For this reason, they are recommended to newcomers.
One-Touch contract types are a little more complicated to predict than High/Low options. In this case, a trader has to predict if the value of an asset will reach a certain pre-established value during a particular time frame. One-Touch return percentages usually fall in the range of 100%-200% and are ideally recommended for intermediate to expert traders.
Boundary contracts are the most complicated type of trading contracts in the business as contracts of this kind has two strikes. Traders win or lose depending on whether the value of an underlying asset will reach one of the two strike lines during a certain time frame. As these options are harder to predict than other contract types, they offer a high return ratio of 200% -500%. They are, however, recommended only for expert traders.
60 Seconds contracts are simple High/:ow contracts with expiry times of just 60 seconds but are not as easy as regular High/Low options due to their very short expiry time. Return ratios of 100%-150% are therefore considered normal when it comes to this type of contract.
When a broker lists a payout percentage it is usually the highest payout offered for a standard Call/Put option. A broker with a high payout percentage usually offers higher payouts when comparing similar assets to other brokers, although it is not always the case. If a trader chooses to trade a specific asset it is best to look for a broker that offers the highest payout for that particular asset.
Overall, it is important for traders to understand how binary options brokers calculate payouts so that they can create a trading strategy to build their trading account over a period of time. Opting for a partial refund, a service offered by some brokers, can also influence the potential profits a trader can make while also allowing some additional protection against major trading losses. Now you know how payout percentages work, why not sign up with our recommended broker and trade your favourite asset today?