Binary options are currently one of the fastest growing financial instruments available. As the word ‘binary’ implies, traders get a return, or lose their investment, based on their choice of one stance over another.The way binary trading work is simple. An investor can say, “will X asset appreciate or depreciate in value over the next hour” and state his position. What’s great about binary options is that you can make money on both positions. If the investor ends up making the right prediction within the said hour, the investor earns a certain percentage of income based on the money he invested in the trade.
Binary options are popular due to their simple functionality, high returns, short investment time and the convenience trading online offers. However, before you invest your money in binary options, it is always better to weigh the pros and cons involved. Here are a few of them.
Pros of Binary Options
You Can Trade with a Small Budget
One of the advantages of binary options, and one which has attracted a lot of small businesses and entrepreneurs is that you can trade with a very small investment. Traditionally, you might be used to the stock exchange and FOREX trading investment, where you need a couple thousand dollars to see any meaningful return on investment.That’s no longer the case with binary options. You can trade with as little as $100 and grasp the nitty gritty of the trade before investing more.
However, if you are really a serious investor, you should trade a minimum of $500 so as to benefit fully from the management tactics and tools available for you. If you need guidance, you can get that from places like the Stern Options Blog.
A Variety of Assets to Trade in
Binary options trading can be carried out on a wide range of assets. These assets include gold prices, trade stocks, currencies, and commodities. This flexibility gives you, the investor,the option to deal with assets that you’re most familiar with.
Furthermore, due to the lack of caps on the minimum amount you can invest, you can experiment with a wide range of products as you get a feel of the various assets. Therefore, you can quickly learn and before you know it, you’ll have mastered binary options like the back of your hand.
Possible Returns are High and Fast
You will agree with me that the main aim of any investment is to make a profit. The potential to make a huge return on investment on binary options makes it a lucrative option for investment.
In general, you are likely to make between 75 and 90% profit if you win a preposition. This is a huge return on investment that is very rare. There are cases where investors have made up to 500% profit trading binary options.
In addition, you don’t have to wait for weeks or months to see your profits. You can make money within minutes if you choose to.
The concept of binary options is so simple, you can learn in under 10 minutes. It therefore means that you do not have to understand finance jargon to be able to start trading.However, it is extremely important to follow the guidance of experts who have studied the behavior of the various assets available for trading. Its simplicity must not make you complacent and lazy to study the market forces that are crucial for any shrewd financial trader.
Cons of Binary Options
There is Risk Involved
There is one underlying rule that applies to all investment opportunities; there is always a risk of losing money. The same way you stand of chance of getting a return on investment is the same way you can lose your money.
Therefore, it is always safe to ensure you only invest what you can afford to lose. In addition, take your time to investigate the risk involved before making an investment.
Not Properly Regulated
Binary options became popular a few years ago. As a result,the industry is not as fully regulated as FOREX and the Stock Exchange, both of which have been around for decades. This lack of regulation means you’re not always protected as an investor. Only a handful of brokers have maintained a solid reputation over the years, this is why it’s important to do your due diligence on any broker before you sign up.
The chance of rogue trade brokers taking advantage of you is high since they believe they are likely to get away easily. They also do not have a watchdog body to ensure that they adhere to the code of ethics. This increases your risk in an already risky business.
Restrictions on the Maximum You Can Invest
Once more, with binary options being a fairly new phenomenon, most brokers limit the maximum amount of money that investors can trade with (there are very few that have no limit).
This is a disadvantage for high rollers that have a huge budget to trade with and limits their profit margin potential as well.
The Simplicity of Binary Options is Also a Disadvantage
How is the fact that binary options are easy to use a disadvantage? It makes first time investors believe that making money with binary options is easy. The easy-to-use platform creates a false illusion that trading itself is that simple. On the contrary, it takes a lot of studying and research of market forces to make an informed choice. It’s not a matter of following your whims like in the casino; it’s based on calculation and experience.
Binary options has attracted a huge following; no doubt about it. And many have made good returns on their investment. However, since its inception, the binary options arena has also been dotted with cases of scams and brokers swindling investors.Therefore, invest in binary options with your eyes wide open. Start with small investments and take your time to patiently learn the mechanics of the whole concept. It is advisable to identify a trustworthy broker and gather as much information from them as possible.
Once you’ve won and lost a number of trades and have discovered market trends, you can begin to invest bigger amounts of money. Remember that your investment is always at risk of failing; invest wisely.