Basically every person who is involved in online trading to some extent will tell you that forex, is not that easy and you will not be able to master it that fast, especially if you are not willing to invest huge sums into your accounts. The first couple of months it is completely normal to lose all your money, but remember – practice makes perfect. On the other hand, binary options is a bit different because of some facts. For starters, you don’t have to fund your accounts with thousands of dollars and you don’t have to learn lots of complicated strategies just to generate a small profit.
Learn how to combine your skills, risk management and knowledge
Binary options is a composed mixture of knowledge, skills and risk management and the whole idea that stands behind the trading technique is truly simplified. This is why, according to us and lots of specialists involved in this type of trading, binary options trading is a revolutionary new way of simplified trading. It offers a really accessible version of trading, ideal for novice traders while at the same time the experienced traders are not left aside – they can use variety of tools that will help them capitalize their trades in the best way possible.
Naturally, the simplicity that stands behind the word “binary” means only one thing – it is either the one or the other and this philosophy is one of the major reasons this type of trading to be so popular among people who want to become traders. It doesn’t matter whether or not you have financial background or have no trading experience at all – there are levels for any type of trader on the field of binary options – your background is not going to be considered here.
If we have to sum up everything said so far, it would add to saying: every binary options trader tries to forecast the future direction of currencies, everyday stocks or commodities (it is a matter of personal choice, but more on that topic later). Explained in its simplest form everything is about going up or down, and if you want to be considered as winning trader, you will have to predict whether the price is going to go upwards or backwards. Therefore, as the name “binary options” suggest, have only two possible outcomes – win (in-the-money) or lose (out-of-the-money).
In “in-the-money” scenario if the trader is correct and the price of the asset goes higher/lower, the trader will receive a return varying between 60-90% on top of the original investment.
In “out-of-the-money” scenario if the trader is incorrect and the price goes opposite to the suggestion, then most of the initial investment will be lost.
Binary options approach provides really interesting advantages over the investment vehicles. For example, the removal of ask/bid spreads, hidden fees and leverage makes it extremely easy for beginners to master the way of trading and keep track of their risk capital. Also, since you have only two possible positions in any given binary trade, there is no easier way to take your knowledge to markets.
Accurate forecasting
Essentially, there are 2 important questions that every new binary options trader should keep in his mind. First, how much to invest in a certain position, and second whether the asset will fall or rise in a given period of time.
Once you master the ability to make those choices and lock the trades there is nothing more to consider. You will just have to wait and see whether your forecast is going to be right. The best part is there are no stop-losses to manage and no way for an open position to leave you over exposed because all the information a trader needs is simply available before any trade is being committed.
One of the most attractive and important aspects of binary trading is the transparency they offer. Thanks to the pre-calculated risk levels a person can choose exactly how much to invest and for how long. By having this knowledge you, as an experienced broker, will be able to implement robust money management, which is also one of the most important aspects of binary trading. Thanks to the simplicity of trading traders have more time to focus on the trade itself rather than the details of every open trade.
Below you will find a brief example that will help you realize why binary options trading is so simplified, especially compared to forex trading. Let’s assume that a trader wants to place a bet on the EUR/USD currency pair via spread betting and binary options trading and see what the main differences are. For this example, let’s also assume that the Euro is going to strengthen its position against the US dollar. The trader bets 20$ on per pip, meaning if the difference is 10 pips, the profit will be 200$. (10 pips x 20$ per pip).
The first disadvantage in spread betting comes from the fact that the trader has to buy 1 pip above the market rate and sell it 1 value below the current rate. So if the pips have increased by 10, this means your profit will be actually 8 (buying 1 pip above the current price, selling 1 pip below the future price). Even if you win, this might be considered as 20% loss.
On the other hand, in binary options trading – there is no spread. It doesn’t matter if you are right by 10 or 100 pips – as long as you predict the right movement – you win. Usually the returns are fixed and the percentage is approximately 75%. With binary options, all the trader has to do is to place “up” or “down” option on the currency pair, chose the sum he wants to invest and select expiry time. If you win and you have invested 2000$, then you will generate a profit of 1500$.
We hope that you have understood the above scenario because it explains why binary options trading is so simple and considered to be revolutionary – the sooner you get into this trading – the better, because there are lots of things you have to learn!
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