Binary options are a relatively new investment vehicle. However, they have become incredibly sought-after and continue to grow in popularity, and for good reason. The reality is that binary options offer incredibly high returns over a short period of time, making for an exciting investing environment.
If you’re interested in trading binary options, it’s important that you understand exactly what they are, as well as the pros and cons associated with trading. Today we’ll go over binary options in detail, to help you understand exactly what this trading vehicle is.
What Are Binary Options?
Binary options are unique in the sense that when trading, you’re not purchasing any assets. This means that no shares or commodities are actually changing hands. Instead, binary options traders make predictions with regard to whether the value of a financial asset is likely to rise or fall. If these predictions are correct, the trader has the ability to earn exceptional gains. If the predictions are incorrect, the trader will realize a loss.
Binary Options Pros & Cons
As with any other form of investing vehicle, binary options come with their own pros and cons. Here’s what you can expect when trading binary options…
Binary Options Pros
- Little Money Needed To Get Started – One thing that stops many prospective investors from ever getting started is the high minimum sum associated with most investment vehicles. However, that’s not the case in the world of binary options. In fact, traders can get started with an investment as small as a couple of hundred dollars!
- High Returns – This is what tends to attract the most traders. When trading stocks, commodities, and other financial assets, a good return can be 10% over the course of months. However, when trading binary options, return rates are generally around 80% and it doesn’t take a month to earn these returns. In fact, binary options trades can yield high returns over the course of a few minutes.
- Fast Paced Trading – Let’s face it, when it comes to investing, we’re talking about a topic that many people consider very boring. However, that’s not the case here. By their very nature, binary options are a fast-paced investment vehicle in which most trades usually expire within a few hours. As a result, most people consider binary options to be the most exciting way to trade!
- Simple Risk Management – When trading binary options, the trader knows exactly how much money they can earn and how much money they can lose before making the trade. This knowledge makes risk management an incredibly simple process for binary options traders.
Binary Options Cons
- Fast Pace = High Risk – While the fast-paced environment associated with trading binary options makes this a very exciting investment vehicle, it also increases the risk. With such short expiry times, it becomes more difficult to make profitable predictions.
- Regulation – As mentioned above, binary options trading is a relatively new investment vehicle. As a result, there is still questionable regulation in many areas, and most brokers simply aren’t regulated. So, if you decide to trade binary options, it’s important that you choose to work with a regulated broker. It may take some time to find regulated brokers, but the protection is well worth the effort.
If you’re interested in binary trading financial assets, you’re likely to be pleasantly surprised by the gains you realize when doing so. However, it’s important to remember that the fast-paced environment does add to risk. So, before trading, do a bit of research on risk management strategies.
All in all, there are far more pros than cons associated with binary options. With a bit of research, this could become the perfect investment vehicle for you!