We’ve all had that sinking feeling of listening to a conversation and not quite understanding what everyone’s talking about. Binary trading is highly popular these days and now draws participants from across the investment community to try their hand at this latest way to trade. Beginners and seasoned trading veterans are both drawn to this new form of trading, indicating its widespread appeal. Binary trading can be one of those topics of discussion that has some people running for the hills. However, there’s no need to duck out of conversations about binary trading as we’ve pulled together a handy guide detailing the pros and cons associated with binary options trading.
The Pros of Binary Trading
With binary trading, there are a tonne of different assets you are able to trade on including, stocks, indices, forex rates and commodities. This is one of the main reasons why binary trading has become so popular, as it holds widespread appeal across the investment community.
Firstly, one of the key pros associated with binary trading is the vast potential for a quick payoff. Within minutes, traders can make a whopping 70% return on your capital. Sometimes, payoffs can actually be higher as many brokers will now offer a special ‘one-touch’ option that comes with astronomical payoffs. These special weekly ‘one-touch’ options can pay out up to 500% at a time!
Another pro of binary trading is its simplistic nature. The decision tree associated with binary trading is very straightforward. All you are required to do is to pick the asset class, amount of your position and expiration point. You’ll then need to pick the correct directions vs target value, which is always provided by the broker. Whilst this may sound daunting, it’s actually a relatively simple process as no other decisions are necessary.
Within binary trading, risk management does not factor into the equation because you are able to set your own risk tolerance. You are only ever able to wager what is in your account, so you never have to worry about a margin call with binary trading. Most brokers will now provide you with a host of advanced features that experienced traders can take advantage of, which enables a beginner to grow as he learns the ins and outs of the binary trading business.
The Cons of Binary Trading
As with most trading options, binary trading is not all ‘peaches and cream’. You can’t forget that brokers are in this trading business to make money and current odds are stacked highly in the broker’s favour. In order to break even, a trader must still win 55% of the time. In some ways, your odds are actually better at a roulette table! The majority of binary trading brokers operate out of tax havens, where casino betting is a local industry, which means your existing brokers are not likely to offer this trading option.
Whilst the opportunity for high payoffs makes this a highly profitable trading option, it also comes with higher risks. Moving in such short timeframes makes it harder to predict market movements.