Binary options trading: the pros and cons

A growing trend in the online trading community is for binary options trading which offers a variety of stocks, forex and commodities among other financial opportunities.

Underpinning its rapid success is the potential to make a lot of money very quickly but, as with all trading opportunities, there’s also the opportunity to lose money as well.

Trading in binary options is simplicity itself: traders choose a product and then predict whether its value will decrease or increase within a set time.

Making the correct prediction will result in a profit while making the wrong one will lead to a loss.

The pros and cons of binary options trading

The big pro in trading in binary options is that there is a quick payoff; the return on capital can be as high as 70%.

Even more impressively, the rewards can be paid within minutes or just a few hours.

Becoming a binary trader is straightforward and another major appeal for so many people is that it does not involve a complex decision making process.

And when trading on most binary platforms, the trader can limit their exposure to loss.

This helps with risk management because the trader will set the risk tolerance which will be linked to the size of their position.

If the decision is the wrong one, they may not lose all of their money and they may even be reimbursed with a rebate amount.

The cons for a binary options trader

As with all financial trading opportunities that are downsides and risks as well as upsides and rewards.

Anyone becoming a binary options trader should be aware that they are playing a high-risk game in a bid to earn high profits. This means they will inevitably have to take risks.

In addition, the markets, whether it’s in stocks and shares or commodities, will and can move quickly.

The markets can also be inconsistent too which makes them difficult to predict.

Binary options trading tools

The situation isn’t helped with the lack of training tools available for those starting as traders although some binary options trading platforms do provide information dashboards and a commentary to help make decisions.

The danger for those new to binary trading is that they may panic when the market shifts against their position – and it may move quickly and appear to inflate the size of the loss – and if they haven’t checked the indicators on the platform, they may well take a decision that costs them dearly.

There’s no doubt binary options trading is a novel and interesting way to trade and is becoming increasingly popular with online traders – do it right and the rewards are impressive but it needs talent, patience and an appreciation of how to do it well.

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