Binary options are short-term contracts with limited risk and two potential outcomes at expiration: the investor either loses the money they paid to open the trade, or receives a predetermined profit
Binary options are short-term contracts with limited risk and two potential outcomes at expiration: the investor either loses the money they paid to open the trade, or receives a predetermined profit (when the bid on the outcome of the event is made correctly, all conditions are met). Payouts are fixed on either side of the strike price.
Depending on the type of payments, there are: asset-or-nothing (when payments are made by the underlying asset) and cash-or-nothing (payments in monetary terms).
Binary options: features
A binary option contract is based on the investor’s prediction of the value of the underlying security – on a predetermined date.
The strike price is central to the decision-making process regarding an option agreement. To place a trade, the investor must decide whether he thinks the underlying market will be above or below the strike price. You can trade contracts with a duration of up to one week and a duration of just five minutes.
Is it really possible to make money using binary options software? Yes, making money from their trading is a reality. It is possible to obtain a stable profit. Savvy traders do this regularly, trading on everything from currency pairs and stocks to gold and oil.
But becoming a successful trader requires hard work. Although it is possible to become rich overnight (this financial product promises quick and high profits), good strategies are focused on long-term success. Get rich quick schemes work for one trader in a thousand.
Binary options: what is the difference from trading
In the first case, there is neither a depository nor property. Nothing is sold or bought. The trader simply places bids with the hope that his bid will win.
Many beginners are interested in the question: how much money do you need to open a binary trading account? Binary options cost from 0 to 100 dollars. The minimum deposit can vary from broker to broker, usually ranging from 10 to several hundred dollars. Many of them offer options with a low initial deposit, which makes participation accessible to beginners.
Binary options: how to trade correctly
For such trading, you need to select a broker, open an account, download a terminal or operate in a browser. The meaning of the activity is as follows: the trader must guess, “feel” whether the value of the selected asset will decrease or increase. Direction selection – buttons: Down/UP.
When is it better to trade?
The peak activity of the European session is the time period from 9:00 to 12:00 and from 13:00 to 15:00. These are the most optimal periods to trade this financial product, as many profitable trading strategies apply to the busiest market.
Advantages
Binary options are considered the simplest form of Forex trading. They are also beneficial in many ways, especially when compared to traditional options. Thanks to these and other advantages, trading in exchange contracts on the Forex market is gaining momentum.
The main advantage of options is that it is possible to develop a value-neutral strategy and plan to generate income taking into account a correctly formed volatility forecast. Without a price forecast, you can trade in the stock market. There are 2 types of options – Call, Put.
The benefit of working with exchange contracts is that the trader in this case has a chance to conclude one or more transactions within just an hour.
To summarize, we can note the following advantages of trading binary options:
- known risk, fixed reward (the trading structure allows the trader to hedge risks, determine the size of his profit or loss even before his contracts are administered);
- high return on investment;
- easy trading;
- certain profit even in case of loss;
- free trading accounts with selected brokers.
Experts also note the high turnover rate – this means quick profit in your pocket.
Overall, binary options white label is a ready-made platform that is not only easy to use but also a powerful investment tool. Once you know the direction, you can select a contract and execute it based on the market trend.
Disadvantages
Binary options trading is a form of investing. This means that while there are some obvious benefits, there are also some downsides. So, the reverse side of such trading implies:
- the income will not be fixed – you can make a profit only from those transactions that were successfully buried and depending on how much was invested. Income is usually 70-85% of the transaction amount;
- when buying shares, if their prices fall in the future, the securities can be sold and part of the invested funds can be returned. But this cannot be attributed to binary options, since the value here is the correctness of the forecast. The investor does not buy tangible assets; he has nothing to sell if his forecasts turn out to be wrong;
- It is a fact that most binary options traders lose money. On some platforms, the number of such losses can reach 80%. It is important to consider common trading mistakes to stay ahead of your competitors.
Although binary options can be used in theoretical asset pricing, there are scams in this area. In many jurisdictions, options agreements are prohibited by regulators as a form of gambling. Quite a few binary options shops have been caught committing fraud.
You can fall into the “network” of scammers when dealing not with a real binary option, but with a fake one.
Legislation
Many online platforms for trading such exchange contracts operate in violation of the law. Some of the unregistered platforms denied refunds, credited customer accounts, committed identity theft, and manipulated their software to create losing trades.
You should always be aware of binary options scams. It is important to beware of inflated investment returns in exchange-traded contracts. For example, it happens: with an expected probability of winning 50/50, the payout structure is designed in such a way that the expected ROI actually becomes negative. This results in a net loss for the client.
Among the disadvantages of this financial product is high speculativeness. When it comes to investing, it is more common and safer to do so in markets that are regulated. However, there are very few regulated binary options brokers, which increases the risk associated with investments.
The very nature of such a financial product makes it speculative. Markets can be unpredictable, and short time frames can add to that unpredictability.
Conclusion
Binary options trading, like any other form of investment, has both its pros and cons. All this is unique. Unlike most other investment instruments, returns on exchange-traded contracts typically exceed 70%. But the risks are not small.