Online traders have a lot of options when it comes to what they want to trade with. They can choose to take the forex route. They can also invest in stocks. Or they can try their hand into binary options.
Binary trading is a very simple option. As the name suggests, this trading option is a simple proposition. There is a question about the price of the underlying asset and you have to guess whether the asset’s price will be higher or lower than a certain level. If you answer correctly, you get a set amount of profit and if you cannot guess correctly, you lose your investment.
Now, let’s take a look at the advantages and disadvantages of Binary Options Trading, which will enable us to come up with the answer to whether they are worth using or not.
Why you should trade Binary Options
The main selling point of Binary Options is their simplicity. You answer a question and you complete the trade. This simplicity makes it easier to learn how binary options trading works.
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As a beginner trader, it can be very efficient to learn this simpler method before diving deeper into the vast number of concepts related to stocks and forex.
Another amazing advantage this style of trading provides is the option of having a trial account. This is a very big advantage for traders. You can start a demo account with some brokers and start trade using a handsome sum of currency.
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This practice acts as a training drill for when you use your own money. And when you are ready to trade using your own money, there are brokers available out there that give you the opportunity to work with as little investment as possible, for example, $10.
These aspects make it very compelling and affordable to use binary options, not to forget that it is possible to make huge profits in a little amount of time.
Why you should not trade Binary Options
The advantages are very promising and one might think, what disadvantages can even be there in using this style. But the fact is that this field is filled with disadvantages as well.
The first and foremost is the number of scams in the market. There a lot of brokers out there that are just sitting with their eyes fixed on people’s money. In reality, you’re not going against the market but you trade against the broker, which means they will only make money when you lose on a position.
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This explains why a lot of brokers make it very difficult to be successful and if you manage to do a successful trade, you are met with a big number of transaction difficulties. Basically, if somehow you ended up with such a broker, you are guaranteed to lose money even if you win.
Another point worth noting is that binary options trading is just gambling and there is always a high-risk factor. You cannot predict with surety where the market will move. Although, all styles of the profession have a certain amount of risk involved, there is still a way to counter that risk that is not available in binary options.
For example, if you are a forex trader and you plan your sessions in such a way that the money you lose is less than the money you earn per session, you can still be profitable in the long run even if you end up losing half the time. This is not possible when trading Binary Options, where you will 100% of your investment when you lose a trading position.
In short, Binary Options are both very profitable and highly risky. So, it is advised to only trade binary options when you have a credible broker and some spare money lying around and always practice with a demo account before using your real money.