BO brokers and a number of traders, when describing digital contracts, mainly pay attention only to the advantages of binary options . As a result, beginners may get the impression that this type of activity is capable of generating constant and high income with minimal time and money costs. But in practice, this income has a number of disadvantages. That is, before trading binary options, the pros and cons of binary options must be taken into account.
Content:
Pros of binary options
- High income . This is the main advantage of binary options. Depending on the brokerage conditions, profit from one contract can reach up to 92% of the investment amount in the transaction. That is, by investing $100, a user can receive $92 in a short period of time. Such profitability is not typical for most types of activities, including those related to financial markets.
- Wide selection of tradable assets . The advantages of binary options are that each digital contract can be based on different trading instruments: stocks, indices, currency pairs , cryptocurrencies and so on. A number of brokers allow you to open transactions with more than 80 assets. Moreover, the minimum investment size does not depend on the type of financial instruments. That is, the user can open transactions for gold or oil by investing 10 or 100 dollars. An additional advantage is the fact that traders can change markets taking into account the current situation, their own preferences, etc. If oil trading does not generate income, then you can immediately switch to currency pairs or cryptocurrencies.
- Minimum entry threshold . Compared to other options for making money in financial markets, binary options offer the best conditions for beginners. This is explained by the fact that you can start making money on digital contracts with a minimum deposit . Some brokers allow you to open transactions after replenishing your balance by 5-10 dollars.
- Controllable risks . This plus comes directly from the previous one. By investing small amounts, traders can control emerging risks and, as a result, reduce the likelihood of losing their deposit . Speculators can only lose the amount they invested in one trade each time. The contract price is fixed after purchase and does not change until the order is closed.
- Wide selection of trading platforms . You can trade contracts using browser, mobile and desktop platforms from anywhere with constant Internet access. The interface, as well as the functionality of the terminals, practically does not differ from the type of devices on which the program is installed. The speed of the platforms also does not change depending on the type of version. This parameter is determined only by the bandwidth of the channel through which the device is connected to the Internet. And browser-based versions of terminals allow you to conduct trading operations without installing programs.
- Simple and clear trading mechanism . In this case, it should be noted that we are not talking about the ease of making money on digital contracts. The main advantages of binary options are that to receive income you need to select an asset, set the expiration date of the contract, deposit a certain amount and indicate the direction of the exchange rate. After this, you need to click on one of the two buttons in the trading terminal. Upon completion of the simple procedure, the contract will be automatically purchased. The trader will only have to wait until the transaction is closed. If the forecast is successful, earnings on the transaction are transferred to the deposit.
- Wide selection of binary options types . The main type of contract is the “Higher/Lower” option. That is, the user needs to determine in which direction the price of an asset will move over a given time interval. But brokers offer different trading options. Users have options such as “Touch/No Touch”, “Range/Out of Range” and others. Each type of option allows you to make money on different situations unfolding in the market. Using the Range/Out of Range option, users have the opportunity to profit from a quiet market, when there is no clear trend and rates are practically unchanged. Some brokerage houses are expanding the list of services, offering the opportunity to close an order prematurely or extend its validity period. The first is necessary for incorrect forecasts, the second for successful ones.
- Demo account . This tool is free and has unlimited access. A demo account is used both to gain first trading skills on a real chart and to test strategies and indicators .
- Mobile trading binary options . You can trade binary options from a desktop computer, smartphone or tablet. All that is needed for this is the Internet, which in the modern world is available almost everywhere. This approach allows you to trade at any time and anywhere, and also to always be aware of events in the financial markets.
- Availability of training materials . Brokers are interested in a constant and wide audience. Therefore, companies offer clients the opportunity to receive training in binary options trading by providing free materials and conducting a variety of seminars, webinars and other programs. In addition, you can find any information related to this type of activity on the Internet.
Cons of binary options
- Lack of official regulation . Reliable binary options brokers operate on the basis of licenses that are issued not by Central Banks, but by third-party organizations. Some of the most popular organizations are TsROFR and CySEC . Such regulators have a certain “weight” and impose strict requirements on financial market participants. That is, the activities of brokerage houses are regulated in a certain way. But still, the disadvantage of binary options is that there is no official regulation of this activity. The lack of a regulator makes it difficult to find an honest broker . To select a similar company, you have to research the history of their activities and pay attention to reviews.
- Fixed and constant income . Despite the fact that this feature of contracts is considered an advantage, in some cases it is a disadvantage of binary options. An example of this is experience in Forex . In this market, with a strong rise in price, income can increase multiple times. A similar situation is more relevant for a strong trend , when the asset price rises sharply in a short period of time. During these periods, Forex speculators earn a lot of money. But the income of a binary trader under similar conditions does not exceed 70-92% of the investment size.
- Permanent loss . The amount of profits and losses is always fixed after opening an order (this is the amount that was invested in the transaction). This setting cannot be changed. The only way to reduce the amount of loss is to close the deal early . In this case, you will receive a small part of the investment back on your deposit.
- Brokers are scammers . Options, due to their simplicity, attract the attention of a wide audience of people who want to make money in the financial markets. This is often used by scammers who hide under the guise of reliable companies, which is a serious disadvantage of binary options. Moreover, clients usually find out that they are black brokers after some time. The type of fraud is indicated by the refusal to withdraw both earned and previously credited funds to the account. There are also cases described on the Internet where unscrupulous managers of such companies take away clients’ earnings. Identifying fraudulent brokers is often difficult. This is more relevant for new firms. Such brokers (including reliable ones) make very profitable offers in order to increase the audience of clients. But in this situation, it is difficult to distinguish between a reliable company that will pay wages and a scammer. Examples of such brokers are BinTradeClub and Stars Binary . These brokers, in addition to the lack of any licenses, have dubious websites with many suspicious links or contacts. Therefore, it is important to approach the selection of proven and high-quality brokers very responsibly, since possible future income depends on this.
- High psychological stress . The success of BO trading directly depends on a person’s personal qualities. The inability to wait a long time for an order to be closed, the desire to make money faster and other emotional actions can lead to a quick loss of money. The main risks traders face include emotions. Having succumbed to euphoria, the user stops analyzing the market and opens transactions based on intuition. Failures also provoke negative consequences. Due to financial losses, people begin to feel fear before every operation, which also leads to mistakes.
- Search for the "Grail" for binary options or "Grail" syndrome . This minus of binary options is the most harmless, since not every trader is searching for the Grail. And yet, most traders are faced with a very strong desire to find a trading method that would bring stable high profits without spending time and money, but there is always only one reason for such a desire - this is the reluctance of traders to learn and spend time reading books on trading . training on demo accounts, testing strategies or indicators, and the like. It is precisely because of the pursuit of easy and quick profits, as well as because of laziness, that up to 90% of not only beginners, but also experienced traders lose money in the market. Therefore, everyone who wants to start making money in the financial markets should understand that there is no “Grail” in trading and without effort and constant practice it will be impossible to achieve a stable income. Also, don’t think that anyone will be willing to sell for $50, $500 or $5,000 a super profitable trading system that can bring in hundreds of dollars a day without risk by pressing just a couple of buttons. It is better to immediately ignore such offers, as this will save a lot of money and time, which can be spent on practicing and learning to trade.
Conclusion
As you can see, there are many serious advantages and many serious disadvantages to trading binary options. But the impact of all these disadvantages can be easily minimized if you learn to control your emotions and adhere to the rules of money management and risks. Learn these basics before you start trading on a live account and you are sure to succeed.
See also:
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