There is no doubt that binary options trading has become increasingly popular among retail investors all over the world. The main reason for such rapid growth behind this type of trading is the overall relative simplicity of the type of investment. In the most simplest of terms, binary options trading predicts whether the asset value will increase or decrease in a given time frame up to the maturity, namely choosing between âcallâ and âputâ options. In the end, you observe either a profit or loss on your bet.
While binary options trading has become more popular in recent years, it may not be the best option for you and your stock portfolio. There are a number of factors that should be considered if you are thinking about putting cash into binary options, including a potential $0 payout once everything is said and done. Consider the following points before you make a final decision.
Is it really a type of trading?
The word âbetâ in paragraph one was not used accidentally. In the opinion of many financial advisors, binary options are a form of gambling rather than a financial instrument or trading. Options are quite risky and here’s why…
Imagine that you have chosen a âcallâ option on Amazon shares in 1-minute time-frame. Logically, it is almost impossible to predict what will happen to these shares upon such expiry time. Following the logic, for such short-term trades you will unlikely be able to observe any trends or read a single announcement to support your investment decision. Hence, the outcome of this trade depends purely on luck, just like your cards at the Blackjack table.
Some investors think that the most decent binary options trading type is long-term. However, most financial markets present better alternatives for long-term investments than binary options.
Unrealistic expectations from options brokers
Some people have found that binary options trading often feel like frauds or scams. This is not true but you should approach every binary options trade with caution and seek financial advice prior to entering an agreement. There are numerous reputable brokerage firms that are supervised by various regulatory authorities that can assist you in this. However, these legit brokers are slightly outnumbered by non-regulated participants so be sure that you are getting advice and direction from a registered financial advisor.
Traders have found that one of the main problems with binary options brokers is providing unrealistic expectations of your options trading return. If you would like to avoid this, you can personally look up terms and conditions of each brokerâs services and witness enormously high payouts (or not). Some brokers will promise low costs and entirely controlled risks which is impossible for any broker to truly promise. Since binary options trading was initially considered a flagship in online trading, a lot of stories written by ordinary people sharing different success stories about âeasy moneyâ or â100% money-makerâ appeared across the web. This was the very case with IQ Option.
In practice, most of these claims confront the reality. Moreover, traders quite frequently lose their money because they simply cannot manage high uncertainty and risk. Therefore, binary options do not represent absolute winning opportunities. Adequate trading experience with feasible strategy is recommended if you ever wish to try betting on binaries.
In conclusion, most financial advisors will advise you against investing in binary options. They conceal an unjustifiable amount of risk and do not present real investing such as stocks or Forex. Even though it is still possible to win a large amount of money, this would rather be an exception than the generally accepted rule. Binary options brokers may promise you great opportunities, though it is questionable if they will meet any of your expectations. If you choose to move forward with binary options trading, know the risks and know the probability of receiving a return.
Have you ever traded in binary options? How did you fare?
Photo: Flickr: OTA Photos
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