Binary Options Trading Overview

In spite of all the negative hype surrounding binary options trading as a high-risk investment product, there are no indicators to suggest that binary options trading is losing popularity among modern traders. In fact, even the most traditional investors with a conventional trading mindset, are slowly starting to accept the concept of binary trading due to its obvious benefits.

Traders must realise that there are obviously greater risks in binary options trading than any other investment products, but the risks can be controlled to a large extent. Serious investors with the right trading attitude can reap exceptional rewards from the binary options market. On the contrary, traders who gamble in the markets can also lose more money than they have invested. Nevertheless, we analyse some of the valid reasons on why trade binary options, and how traders can benefit from the binary options market.

 

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$20085% VISIT

 

A Simple Trading Concept

Almost all financial products, including Forex trading, are extremely complex in nature. There are multiple trading concepts, market analysis, trading tools, and other aspects of trading that can change the outcome of trades quite drastically. Traders are expected to learn the underlying factors that affect the markets, which is why hedge fund managers, investors, and even day traders spend thousands of dollars on high-quality trading education. It is also one of the reasons why top financial companies look for the best and brightest talent in the industry, in a bid to gain an edge in the markets.

 

Binary options trading is a relatively simple concept, as it only requires the trader to predict the short-term fluctuations in the market. Although traders can benefit from an extensive market knowledge and education, it is possible for traders to succeed in binary options trading by having a minimal amount of market knowledge.

 

Traders can also receive expert guidance and trading materials from binary options brokers or other third-party service providers, which help traders to hit the ground running without any formal trading education. Most investor-oriented binary options brokers make it a priority to offer extensive training resources, market analysis tools, and trading signals, which make the job easier for binary options traders. The simplicity of trading is indeed one of the top reasons why investors choose binary options over other forms of investments.

 

Low Trading Capital & No Leverage Exposure

Credits must be given to Forex trading, which opened up a world of possibilities for smaller retail traders. Conventional stock trading required traders to invest a hefty amount of trading capital, which virtually barred access for smaller investors. However, with the introduction of online trading among retail traders, it is now possible for traders to invest a meagre sum of money in the markets and trade among the industry heavyweights.

Although Forex trading, and even modern stock trading accounts to a greater extent, allows traders to start trading with a minuscule trading amount, traders are still not capable of enjoying direct market access conditions. To be able to invest in the markets properly, traders may be required to deposit thousands of dollars as the trading capital in a brokerage account, which can frankly keep the market out of reach for smaller investors. Therefore, retail trading accounts offered by micro or mini brokers use the concept of margin trading to leverage traders’ positions in the market, which increases the risk many folds.

 

A leverage of 1:500, which is quite common in the Forex market, can lead to a losing trade with just 20 pips movement in the opposite direction of a trade. If a trader uses his/her entire account equity on a single position with the maximum leverage, a small movement in the market can trigger a margin call, which can eradicate the trader’s entire account equity. Hence Forex brokers, at times, can have the same conflict of interest as a regular binary options brokerage. As a consequence, Forex trading accounts may sometimes be considered to be far inferior to binary options trading accounts.

 

Binary Options allows a trader to invest as low as $1, while some brokers even allow its clients to trade with small position sizes starting from 10 cents ($0.10). Binary options trading does not use leverage, which means that traders don’t have to worry about exponential losses in the case of a losing trade. Lower capital exposure and no leverage mean that risks in binary options trading can be better managed than in other forms of trading.

 

Shorter Time-Frames – Traders Don’t Wait For The Trade To Develop

Binary options trading involves a fixed time of expiry for contracts, and the timeframes are usually lower than in Forex or stock trading. Orders are executed instantly, and trade times can be anywhere from 30 seconds to 24 hours. Binary options traders normally prefer to trade with shorter expiry times, which grants better control over trades and a better return on investment over a smaller duration.

Binary options traders don’t have to wait for trades to develop according to their market interpretation, or leave profits on the table in search for higher profits. Traders only have to predict the direction of trades, and at the time of expiry, traders will earn money if the market moves in their favour. Of course, there are other binary options products such as range, touch/no-touch, and ladder options, where the strike prices are more relevant than the time of expiry of the contract. Trades may be closed in profit or loss when binary options touch a predetermined strike price, which can be less than the time of the expiry of the options product. Nevertheless, binary options trades will expire at the time of expiry, and there will be a trade outcome regardless of the market movement.

The average time for binary options trading is around 30 seconds to an hour, and traders rarely opt for higher time frames. In comparison, Forex and stock trading can take hours, days, weeks, or even months to develop. Long-term investors are also known to hold on to their positions for years, only closing their positions if they are comfortable with their return on investment. Even high-leveraged Forex trading has an average trade time ranging from an hour to a day or a week, according to the magnitude of movement of the asset.

 

High Payouts

Binary options trading provides the best Return on Investments, as profitable trades can offer as much as 1500% ROI. Payouts in binary options trading are offered as a percentage return of the invested amount, and there are three outcomes to a binary options trade. In-The-Money Trades, also known as ITM trades, are options that expire in the money and are profitable for the trader. Out-of-The-Money, or OTM trades, are options that expire out of the money and results in a loss for the trader.

 

If the price of an asset closes at the entry price, the entire invested amount is returned to the trader. ITM trades offer a fixed payout, while OTM trades result in a loss of the entire invested amount.

 

The payouts for binary options vary according to the broker, the asset, the type of option, and the time of expiry. Classic high/low options provide a maximum payout of 95% for ITM options, while losing options may sometimes provide a return of up to 25%, or in some cases, can result in total loss of the invested amount. High-risk options such as the ladder, range, and touch/no-touch options can indeed provide higher returns, with an average payout starting from 200% that can go all the way up to 1500%.

 

Instant Results

The main allure of binary options trading is the ability to enjoy instant results. Binary options trading yields a better ROI for winning trades, as a simple $10 invested in an option can result in a $9.5 profit within as small as 30 seconds. When one compares binary options trading to Forex trading, a $10 invest in an FX currency pair will require a trader to achieve 95 pips in profits (spreads not included), at a minimum leverage of 1:100. 95 pips are quite a massive move in the Forex markets, and it may take hours for the pair to move 95 pips in a trader’s favour.

 

Most major currency pairs such as EUR/USD and USD/JPY have smaller movements in the market, where large moves are usually worth around 50 pips. For a 95 pip move, traders will either have to expect a news event or wait for a considerable amount of time for the trade to develop. It is also possible for such trades to be profitable for a lengthy amount of time, and then retrace its gains to end up as a losing trade.

 

There are no such worries in binary options, as traders don’t have to depend on the magnitude of movement of an asset unless they choose binary options such as the ladder, range, or touch/no-touch options. Classic high/low options are incredibly popular for this very reason, as traders can enjoy immediate results, without spending hours in front of their trading platform. The lower duration of trading is beneficial for traders who can’t spend hours in front of their screens, or if they have a busy schedule with no proper time set for binary trading. Instant results also help traders to be flexible in their trading approach, as it allows them to trade at any time during the regular trading hours.

 

Fixed Risk & Reward – Risks Can Be Known Beforehand

Unlike risks that are taken in traditional forms of trading, binary options allow traders to set a predetermined risk per trade, even before entering a position in the market. There isn’t any confusion regarding the risk or reward per trade, as the trading platform provides precise information on the profit and loss potential for a trade prior to buying or selling an option. The ability to determine the risks and rewards per trade can help in managing a trader’s position and can have positive trading effects through a sound money management strategy. While traders have the option of increasing their capital exposure mid-way through a trade, the additional risks are known beforehand. There isn’t any cause for concern of being blind spotted by the markets or facing a margin call due to unforeseen market movements.

 

Extensive collection Of Assets

Binary options trading houses one of the largest collections of tradable instruments in the financial markets, which can offer a wide number of underlying instruments from Stocks, Forex, Commodities, Indices, ETFs, Bonds, and Options markets. Some binary options brokers may provide a staggering number of tradable assets, which can easily surpass 10,000 binary options. However, traders can expect some of the leading binary options brokerages to offer anywhere from 100 to 1000 financial instruments, to help traders enjoy a diverse investment portfolio. The availability of a varied list of instruments is one of the major advantages of trading binary options over other specific markets such as FX or stock trading.

 

Negligible Cost Of Trading

Traditional forms of investing have different costs associated with trading, such as spreads, commissions, and SWAPs. The cost of trading can add up to a significant amount, as brokers are typically compensated through these costs of trading. In most cases, binary options brokers don’t charge any additional fees towards trading, as the contracts are implemented between a trader and the broker. Therefore, brokers are usually compensated by their traders’ losses.

However, there are specific binary options exchange houses, where contracts are facilitated between traders, just like in real-world FX or stock trading. These exchange houses don’t become counterparties to their traders’ positions and may charge a commission or fee for facilitating the transfer of buy/sell rights between traders. Such brokerages have no conflict of interest with the trader, but traders will have to account for a nominal fee for binary options trading. Regardless, the fees of binary options trading are far economical than any other financial products.

 

Suitable For High-Risk Traders & Scalpers

Binary options trading is known to be the most profitable investment product for high-frequency traders, who scalp the markets for small gains. Scalping is the process of entering and exiting the markets within a short span of time, in order to take advantage of the short-term fluctuations of assets. Scalpers normally take smaller profits and increase the number of trades to generate higher returns. Sometimes, scalpers may be able to make a significant gain within a small duration, but the risks are way too high due to the uncertainty of the financial markets.

 

Scalpers often leave a massive amount of profits on the table, as it is impossible to accurately predict the movement of the markets or the magnitude of movement. High-frequerncy traders are known to make the right calls regarding the underlying market trends, but it is the scale of changes in the price of an asset that humbles even the most successful high-frequency trade.

 

Binary options trading, on the contrary, helps scalpers to trade the trends, rather than depending on the number of points or pips gained or lost per trade. High-frequency traders can make high returns per trade, as a right call can result in a higher payout that can provide as much as 95% ROI. Hence, If you are a scalper or a high-frequency trader that is struggling to succeed in the traditional forms of trading, give binary options a try, and see how it can revitalise your trading career.

 

Ability To Trade News Events & Fundamental Factors

Stock brokers and Forex trading companies usually restrict market access to traders during times of high volatility, especially during news releases or other major global events. Such a move is designed to protect traders from high volatility, but it can have negative consequences for traders who have live positions in the market. It is also close to impossible to trade the news unless traders opt for direct market access accounts. Even in that case, the downside risk of news trading is too high, and traders can experience significant account drawdowns.

Binary options trading enables traders to trade the news with minimal downside risk. Traders can cap their losses by specifying a maximum investment per trade, but the potential gains can be massive. Binary options brokers don’t impose any restrictions on trading during news events, and traders are free to trade the markets before, during, and after a news release. Binary options trading is a relatively low-risk investment option for traders who use fundamental analysis for investing in the markets. Binary trading can also protect traders from the massive volatility that are quite common during major news releases.

 

Ability To Trade News Events & Fundamental Factors

Stock brokers and Forex trading companies usually restrict market access to traders during times of high volatility, especially during news releases or other major global events. Such a move is designed to protect traders from high volatility, but it can have negative consequences for traders who have live positions in the market. It is also close to impossible to trade the news unless traders opt for direct market access accounts. Even in that case, the downside risk of news trading is too high, and traders can experience significant account drawdowns.

Binary options trading enables traders to trade the news with minimal downside risk. Traders can cap their losses by specifying a maximum investment per trade, but the potential gains can be massive. Binary options brokers don’t impose any restrictions on trading during news events, and traders are free to trade the markets before, during, and after a news release. Binary options trading is a relatively low-risk investment option for traders who use fundamental analysis for investing in the markets. Binary trading can also protect traders from the massive volatility that are quite common during major news releases.

 

Choosing Binary Options Trading As Your Primary Investment Platform

Trading binary options do have a lot of advantages, and immaterial of the risks in trading, binary options could potentially be an exciting and rewarding opportunity for the right trader. As a trader, you should not only look at the positive attributes of binary trading, but you should also have a thorough awareness of all the negative aspects and risks involved in this exotic financial product, before investing real money in the markets. There is a real risk of losing your entire investments on a few binary options trades, but if you are cautious in your approach, binary options trading can help you to enjoy incredible returns on your investments.