Trading digital options is simple.
Hold on. That’s not to say that it’s an easy way of making money. In fact, every time you purchase a digital options contract, you risk losing your entire stake by the time it closes.
How big is the risk?
Well, it depends on a number of factors.
For example, the price of gold rises and falls on supply and demand, government policies from giant nations, natural phenomenons, and disasters like hurricanes that can result in the closing of mines.
The same applies to the fluctuation of one currency against another. It’s dependent on factors that you as a trader cannot control.
That being said, it is indeed a simple process to trade digital options on Deriv.
In a nutshell, what you do is predict whether an asset will rise or fall in value after a predetermined period of time. You can choose any asset to stake on from these markets:
- Synthetic indices
- Stock indices
When the contract expires and your prediction is correct, you gain a profit. If your prediction is wrong, however, you lose your entire stake.
For the step-by-step process of how to trade your first digital option, we’ll purchase a contract in real-time and demonstrate how it’s done.
Step 1#Choose the market you wish to trade on.
Here you choose from the five market types listed above.
In our case, we’ll go with commodities. Under commodities, we’ll choose the Gold/USD option.
Step 2# Determine the trade type
There are three trade types available for this particular market. And these are:
- Touch/no touch
We’ll go with the first.
How this works is, you predict whether the exit spot will be higher or lower than the entry spot at the end of the contract period. And the simplicity of the trade is that you win if your prediction is right and obviously lose if you were wrong.
It’s at this point that you might want to check the graphs of the underlying asset you’re betting on to study the patterns.
DTrader provides you with 1 minute, 2 minutes, 3 minutes, 5 minutes, 10 minutes, 15 minutes, 30 minutes, 1 hour, 2 hours, 4 hours, 8 hours, and 1-day graphs.
After analyzing the performance of gold under these graphs, we are ready to define our position further.
Step 3# Set the stake value and duration of contract
We are going with a stake of 10USD. And we can set the period of contract anywhere between 5 and 1440 minutes (which is 24 hours)
For the purposes of this demonstration, we’ll select 5 minutes.
Step 4# Select rise or fall
It’s at this point that we predict whether gold will go up in price in the next five minutes or decrease.
We have chosen the Rise option.
And so, for the next five minutes, we can watch the real-time price of gold fluctuate.
We stand to gain $7.55 if it indeed rises from its current market value.
Five minutes later…
The price of gold is lower than it was when we entered the trade. This means that we have lost this particular one.
The stake amount which is $10 is automatically deducted from our account.
Had this been a winning trade in our favor, however, we would have gained the pre-determined $7.55. And our stake ($10) would have remained untouched.
Minimize Your Losses When Trading Digital Options
Is it possible to save part of your stake in a losing trade?
Yes, it is. If you sense that your prediction of the direction of the market was wrong, you can stop the trade at any moment.
That way you would lose some but not all of your stake.
Start trading on Deriv today
On Deriv, you can trade CFDs and multipliers, in addition to options.
Choose your preferred trade type and platform from the variety available on the site.
Are you ready to start your journey as a trader of the markets?