5 Ways to Benefit from This Strategy
As I previously noted, it’s critically important to understand exactly what you’re getting into and setting appropriate expectations if you’re considering binary options.
Now that you understand binary options basics and the different factors between them, you might be wondering whether this type of trading aligns with your investment goals.
Let’s weigh the pros and cons.
We’ll start with the benefits…
1: Low Barrier to Entry
You don’t need a masters in economics to successfully engage in this kind of trading. For this reason, many first-timers enter the trading arena through buying and selling binary options.
Comparatively, binary trading is relatively simple. When compared directly to other types of trading, including quantitative or arbitrage, trading binary options is straightforward and accessible to even the most novice of investors.
2: Fast Returns
Many traders are eager to see fast results and liquidate within a specific time frame. Those who play the long game are typically most concerned with growing their money steadily over long periods of time, and many opt to invest in index funds, IRAs or bonds.
But for the investors who are after speed, binaries may be a strong choice.
3: High Rewards
Binary options trading has become synonymous with high rewards. In many cases, you can receive up to a 70% return on their investments if your binary trades reach your expiration dates in the money. This high average return is what makes this type of trading vehicle attractive to many novice and expert investors.
As explained by Investopedia, the risk on binary options is capped off, so while the rewards could yield high returns, you can’t lose more than the cost of a trade.
4: Low Cost
If you’re just getting started with trading, there’s a good chance you don’t have excess capital lying around to snatch up shares of the fastest-rising stocks on the market. Binary trades offer a great alternative to other types of investments that require high-capital buy-ins.
In theory, you can experiment with a binary trade for any amount you’d like, whether it’s $5 or $50. Starting small and working your way up to bigger trade amounts incrementally is a great way to learn the lay of the land.
As you familiarize yourself with expirations, strike prices and — if you’re interested in one- and no-touch options — triggers, it’s best to gamble with an expendable amount that won’t derail your entire financial status.
Binary trading platforms make it easy to trade on any day and at any time.
When it comes to binary trades, investors aren’t necessarily beholden to standard market times and broker availability.
Now, let’s explore some of the disadvantages of binary trading…
Conduct any Google search on binary trades and one of the first things you’ll likely notice are the abundance of hits warning against binary scams and shady binary brokers.
While these horror stories shouldn’t necessarily scare you out of ever trying binary trading on your own, they should encourage you to be vigilant.
If you come across a binary broker that sounds too good to be true, it’s because he or she most likely is. And if you come across a binary broker who doesn’t let you liquidate your investment, run in the other direction.
2: Short term
Binary trades have expiration dates that are often fairly short windows of time. Given this, it’s impossible to use binary options as mechanisms for long-term investments.
If you’re interested in growing your finances over time, binary options probably aren’t the right solution.
Can You Really Make Money with Binary Options?
Short answer: Yes, but you MUST know what you’re doing.
If you’re serious about binary trading, start small. By making small investments and working your way up, you give yourself breathing room to assess market trends and begin to hone your instincts about when to call and when to put.
As is the case with many types of investments, history is sometimes the best predictor of the future. Many successful binary options traders have experienced trading wins and financial growth because they’ve spent time studying and familiarizing themselves with market movements.
Learning common candlestick patterns can make it easy to spot recurring trading patterns. For example, pinbars are one type of candlestick pattern. If your trading software shows a pattern that resembles a flat body with a protruding nose (either high or low) then the price is likely headed in the direction opposite of the nose.
Of course, trading patterns are never 100 percent accurate, so don’t fool yourself into thinking of them as absolute stock predictions. However, the more you can learn about patterns and begin to recognize them yourself, the more likely you’ll be comfortable making your own options decisions.
Is it Safe and/or Legal to Trade Binary Options?
Naturally, binary options contain risk, but they’re generally considered safe trading routes.
While it’s legal to trade binary options within the United States, they’re only available to trade on Commodity Futures Trading Commission (CFTC) regulated exchanges within the country.
If binary options providers are based outside of the United States it’s probably not legal, so steer clear.
The Bottom Line
The good: Many traders like binary options for their transparency. Since these investments are traded at fixed costs, you know exactly where they stand.
The bad: Binary investments are also one of the more treacherous and “involved” investment roads.
The bottom line: Educate yourself like crazy. Avoid sketchy brokers. Start small and work your way up. Remain vigilant. Stick with these rules, and someday you might reach your binary options trading goals.
Want to Try Binary Options Trading?
At this point, you might be thinking about giving binary options trading basics a shot. It can deepen and diversify your trading repertoire.
This type of trading can quickly become complicated with the many different options available. So, like any other sector of trading, it’s important to seek out an education before you attempt to invest in this way.
As you’ve now learned, if you study hard, start small, keep your scam radar on high alert, and stay educated, then you could succeed at trading binary options — a relatively simple type of trading that’s accessible to all investors, from novice up.
— Tim Sykes
Editor, Penny Stock Millionaires