The opinion of specialists about binary options trading

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The opinion of specialists about binary options trading

Despite the high popularity of binary options among ordinary online investors, many market participants are concerned about the attitude and opinion of specialists about this earnings tool. Doubts about the effectiveness of options are caused by financial illiteracy of the population and opposing views in the network, which form two categories of investors. The first consider binary options as the next scheme of deception, the second ones speak about the profitability and effectiveness of the instrument. We decided to conduct an analysis and offer you a general opinion of industry experts on binary trading.

So, first of all, let’s look at the direct algorithm of the binary contract, which is offered on broker platforms. Options on the sites of online brokers have the most adapted for traders income generation, which has absolutely nothing to do with the real binary options that are traded on the Chicago Stock Exchange. The contract that is offered to us is a deal for the growth or decline in the value of a particular asset, in which no securities or derivatives are purchased and, of course, one can not talk about buying or selling any financial instrument. For this reason, in many developed countries this type of financial activity is referred to as bookmaking. For example, the UK issues online bookmaker licenses to bookmakers. But in spite of this, it is not worthwhile to attribute binary options to a tool of deception, since even in such a regime it is possible to earn and earn money monetarily.

We go further. Specialists who talk about binary trading as a means of deception make such statements based on consideration of some brokerage platforms that can really deceive customers. But these experts do not say that the binary option itself is a fraudulent tool. Of course, fraud is present in any sphere of human activity and you can even face it when buying products in a store. Given this fact, fraud, and this is said by an overwhelming number of experts in the financial market, must be considered through the prism of the work of brokers of binary options.

If the investor works on an unlicensed platform, does not consider the company’s reputation and the professional level of its terminal when choosing a partner for trading, then, of course, the loss of profit and initial investment is a matter of time. In contrast, trading on the professional services of licensed brokers, gives all the opportunities to receive a stable income and at the same time, without delay, to withdraw profits! The reasons for trusting such a broker are simple: the availability of a market regulator license and honest relations with customers that form the reputation of a broker in the financial market.

The main argument in favor of trusting a broker is a license. Since 2008, for the trading of binary options to brokers, licenses are issued by such bodies as CySec, FCA, CNMV, AFM, MiFID, BaFin, CROFR, and many other financial regulators.

They recognize this kind of contract as a binary option as a legal means of trading and a tool for making a profit.

Let’s sum up. First, of course, you may face fraud in the binary market, and industry experts say this all the time. But this is a matter of relations with the broker and not in any way the problems of binary contracts. The second: despite the different attitude of professionals to the algorithm of trading operations with this tool, all without exception speak of the legality of binary options!

“General Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.”

What should a trader know about trading binary options?

Thanks to the profitability and simplicity of the algorithm for the operation of binary options, this line of online trading is gaining momentum in popularity among ordinary investors. But many potential traders can not at the beginning of their career determine the most important aspects of the tool, which allow you to get the maximum and stable profits. Against this background, we offer you a list of important aspects of working with binary options, which every successful trader should know.

A reliable broker is the key to success and security of investments

Considering that all technical processes of trading and making profit on binary options are held online, with the help of specialized trading services, the problem of choosing a partner comes to the fore. Work in the market with the help of a broker is a technical necessity, which is conditioned by the requirements and rules of market regulators. Without the intermediation of a brokerage company, you simply can not open a trading position in the market. And here a lot of problems arise. First, there are a lot of companies on the market that offer a wide range of products and services, which makes the process of choosing a partner difficult. But most importantly, among the variety of brokers often there are scammers, whose task is to steal your funds with a large set of receptions. Secondly, to achieve real success in the binary market, we need a professional technical tool in the form of a trading terminal with good functionality and a set of technical services. And, thirdly, choosing the right partner is first and foremost the safety of your funds. To choose a reliable and professional broker, we recommend paying attention to such parameters of its operation:

– availability of the marketing license of the regulator;

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– professional level of the company’s trading platform;

– financial terms of cooperation;

– the regime and terms of monetization of funds received from trading;

– economic performance of the operator of the market;

– the overall reputation and characteristics of the company in the network.

As an example of an effective partner with the optimal technical and financial conditions of trading and maximum safety for investments, companies that today meet all the requirements of regulators can be offered. These operators of the market now occupy a large segment of the market for these services and provide the most favorable conditions for traders to the partnership.

The effectiveness of trade depends on knowledge and experience

Most potential traders consider option trading a simple occupation that does not require special knowledge. But this is not so: it is impossible to earn here, relying on chance and guessing! Only professional technical analysis, a clear understanding of the market and technical processes of trading will give you a stable indicator of capital growth. For this there is no need to study in a college or university – you can get the necessary amount of knowledge and skills on brokerage sites where the learning process is offered on a free basis. When you completely understand the theory and can effectively apply your knowledge in practice, your trading on the market will give good results.

Trading system: the main tool of the trader

To get the most stable result in the option market, each trader needs a strategy! Using certain rules of work and a set of special tools and approaches for technical analysis of asset quotes, a trader takes precedence over the market. It is expressed in the formatting of profitable trading statistics. On binary options it is enough to make out 60% of productive contracts in order to constantly increase capital. For this, there is a wide variety of specialized technical strategies. With the classic methods of trading in the binary market, you can get acquainted with the service of many companies, which offer a set of the most effective methods of trading.

Money management is the security of your funds

In the work of each trader, there are many psychological factors that always influence the final trading result. First and foremost, this is greed, which forces investors to take unreasonable financial risks. The result of such trading is the loss of operating capital. To consistently earn and keep your money safe, follow the rules of money management clearly. These rules are simple and are available for each trader to execute binary options. Only using the optimal financial indicators of the value of contracts, you can earn income in a stable mode and with full protection of investments.

Let’s sum up. As you can see, binary options are a simple tool for earning money and for its effective use there is a rather small list of recommendations. But their importance and the degree of influence on the result are invaluable!

“General Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.”

Binary Option

What is a Binary Option?

A binary option is a financial product where the buyer receives a payout or loses their investment, based on if the option expires in the money. Binary options depend on the outcome of a “yes or no” proposition, hence the name “binary.” Binary options have an expiry date and/or time. At the time of expiry, the price of the underlying asset must be on the correct side of the strike price (based on the trade taken) for the trader to make a profit.

A binary option automatically exercises, meaning the gain or loss on the trade is automatically credited or debited to the trader’s account when the option expires.

Binary Options Outside the US

Basics of a Binary Option

A binary option may be as simple as whether the share price of ABC will be above $25 on April 22, 2020, at 10:45 a.m. The trader makes a decision, either yes (it will be higher) or no (it will be lower).

Let’s say the trader thinks the price will be trading above $25, on that date and time, and is willing to bet $100 on it. If ABC shares trade above $25 at that date and time, the trader receives a payout per the terms agreed. For example, if the payout was 70%, the binary broker credits the trader’s account with $70.

If the price trades below $25 at that date and time, the trader was wrong and loses their $100 investment in the trade.

Key Takeaways

  • Binary options depend on the outcome of a “yes or no” proposition.
  • Traders receive a payout if the binary option expires in the money and incur a loss if it expires out of the money.
  • Binary options set a fixed payout and loss amount.
  • Binary options don’t allow traders to take a position in the underlying security.
  • Most binary options trading occurs outside the United States.

Difference Between Binary and Vanilla Options

A vanilla American option gives the holder the right to buy or sell an underlying asset at a specified price before the expiration date of the option. A European option is the same, except traders can only exercise that right on the expiration date. Vanilla options, or just “options,” provide the buyer with potential ownership of the underlying asset. When buying these options, traders have fixed risk, but profits vary depending on how far the price of the underlying asset moves.

Binary options differ in that they don’t provide the possibility of taking a position in the underlying asset. Binary options typically specify a fixed maximum payout, while maximum risk is limited to the amount invested in the option. Movement in the underlying asset doesn’t affect the payout received or loss incurred.

The profit or loss depends on whether the price of the underlying is on the correct side of the strike price. Some binary options can be closed before expiration, although this typically reduces the payout received (if the option is in the money).

Binary Options and Regulation

Binary options occasionally trade on platforms regulated by the Securities and Exchange Commission (SEC) and other regulatory agencies, but most binary options trading occurs outside the United States and may not be regulated. Unregulated binary options brokers don’t have to meet a particular standard; therefore, investors should be wary of the potential for fraud. Conversely, vanilla options trade on regulated U.S. exchanges and are subject to greater oversight.

Real World Binary Options Example

Nadex is a regulated binary options exchange in the United States. Nadex binary options are based on a “yes or no” proposition and allow traders to exit before expiry. The binary option’s entry price indicates the potential profit or loss, with all options expiring worth $100 or $0.

Let’s assume stock Colgate-Palmolive Co. (CL) is currently trading at $64.75. A binary option has a strike price of $65 and expires tomorrow at 12 p.m. The trader can buy the option for $40. If the price of the stock finishes above $65, the option expires in the money and is worth $100. The trader makes $60 ($100 – $40).

If the option expires and the price of the Colgate is below $65 (out of the money), the trader loses the $40 they put into the option. The potential profit and loss, combined, always equals $100 with a Nadex binary option.

If the trader wanted to make a more significant investment, he or she could change the number of options traded. For example, selecting three contracts, in this case, would up the risk to $120, and increase the profit potential to $180.

Non-Nadex binary options are similar, except they typically aren’t regulated in the United States, often can’t be exited before expiry, usually have fixed percentage payout for wins (whereas Nadex payouts fluctuate based on the price paid for the option) and may not trade in $100 increments.

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