Essentially, all that the trader needs to do is predict whether the underlying will go up or go down in the specified timeframe. Also, relatively small amounts of capital are required, which makes this type of trading available for many. All that is required is a funded binary-options brokerage account, an Internet connection and a device such as a laptop, desktop or tablet to execute the trades. Additionally, binary options brokers do not charge a commission for the customer to make a trade, eliminating that particular cost to the trader. Finally, this type of trading is done 100 online. It can be done anywhere that there is Internet access.There are several main disadvantages associated with binary options trading. These include loss of capital, lack of tools, and lack of education. Because binary options have relatively short expiration periods, the trader receives very quick feedback about his predictions in the form of profits and losses. For a losing trader, the losses can quickly mount up, especially if the trader executes frequent and ill-planned transactions. Remember, if the traders prognosis is wrong, the outcome will be a loss of most of the traders capital. So, when trading binary options, be aware that although one can make high percentage returns over a short period of time, one can suffer large percentage losses over a short time frame as well. One of the keys in overcoming this disadvantage is for the trader to keep his bet size small. Other disadvantages revolve around knowledge and information availability. The best traders are highly competent at their craft. They receive an abundance of good information, digest it and utilize it in the development of their trading plan. Therefore, an uninformed or relatively uneducated binary-options trader is at a big disadvantage. Fortunately, deficiencies in these areas can easily be mitigated by proper broker selection. The best brokers will provide a wealth of tools and information as well as the use of a demo account.The amount you invest is obviously a personal decision and is based on the amount of your risk capital, your objectives and your risk appetite. One of the more appealing aspects of trading in binary options is that very little capital is required to get started. Depending on the broker you choose, the minimum investment can be as little as 1 to 25. Of course, if you have the financial means, a good trading plan and a history of profitability, then you can invest larger sums.For the aspiring or beginning binary options trader, starting with a small amount of risk capital is a prudent choice. Allow yourself to wade in slowly, learn this market and keep your potential cost of failure low. As profitability is demonstrated the investment amount can be slowly increased. Never increase your capital invested without demonstrating profitability. If you have a succession of losses, stop trading and evaluate what why.As mentioned, binary options can have different expiration times, ranging from as little as one minute to over 24 hours. What governs the investors selection of time period The best time frame is that time frame which is most appropriate to the analysis that was made before entering the trade. This would be spelled out in your trading plan and have been back-tested for your particular market. Thus, the choice of time frame would obviously not be placed willy-nilly or at random, but in conjunction with a set of observations and events that had lead the trader to make an informed prognosis. Aside from that, keep in mind that the longer the time frame, the more opportunity that the trader has to determine if his prediction is correct. Remember, binary options expire. If they expire before the price move you have forecasted occurs, you will lose capital. Such an experience can cause an emotional response that could potentially affect your trading plan going forward.Risk of loss is inherent in any form of trading and investing. Trading in binary options is no different. In fact, it has higher risk than many other forms of trading because of its all-or-nothing nature. The principal methods to reduce the risk of loss involve a combination of considerations. These include proper broker selection, trader education, setting a limit on your risk capital, controlling emotions, and practicing using a demo account. Always choose a reputable full-service broker. The broker should provide a stellar client experience, an easy-to-use trading platform and abundant educational material.Trading decisions are the responsibility of the trader alone. Therefore, it is incumbent on the aspiring binary options trader to become knowledgeable about every aspect of this type of trading prior to making live trades. Partnering with a top-notch broker will make this educational process easy.All good traders plan their trades out in advance. Part of the planning process is the knowing how much capital is available to trade, how much will be risked in each trade, and the frequency of placing trades. Also important is having a predetermined stop-loss as part of the trading plan, after which the trader will cease trading, evaluate the reasons for the losses, and perhaps make changes in the trading plan before recommencing the quest for profits.Emotions are part of the human story. Emotional responses can affect trading success and failure. Many inexperienced traders allow impulsive emotions to impact their trading plan, often with deleterious effects. Remember, trading in binary options is a complex art requiring knowledge of different markets, an evaluation of statistical outcomes, and the construction of a robust trading plan. Rogue emotions are not part of the ideal trading process. The trader should maintain internal mental awareness and be vigilant for undesired emotion responses prior to and during the trading experience.An excellent way to control risk is to use a demo account with one of the leading brokers. A demo account allows you to make practice trades in real time with fake money. By using a demo account you will be able to learn how the binary options market works, engage in real-time simulated trading activity and see if your predictions are profitable or not.