Understand what are binary options.

There is an awful lot of information floating around the internet of tips for trading binary options. The thing is that while the information offered on such sites is accurate and true, it has to be used in conjunction with existing knowledge and experience with binary options trading, or the tips are not of much use.

To help you better use such tips for the next time you are trading binary options, you need to understand what is a binary option. We first need to take a step back and understand what is going on inside the computer's brain when you trade options on a binary platform.

The first thing to realize is that the system assumes that the market is frictionless and fractional, meaning they can buy and sell stocks with no commission, and that you don't have to buy an entire share, but rather a fractional amount of a share. These aspects are part of the Black-Scholes valuation formula and are the basis for trading binary options

Another aspect required by the Black-Scholes model is that it requires a risk-free ability to borrow money, meaning that there is no risk of loosing it, such as depositing it in a bank, and if the money is somehow lost it is insured etc, etc.