Binary options is more predictable compared to other forms of trading because you are trading on a fixed amount of investment. The trading system is as easy as making a yes or no prediction and this is the reason why many new traders are attracted to it. Binary options trading seems easier to traders because it is carried out on an online trading platform.
Earnings and Losses in Binary Options are Predictable
The payout percentage and the potential earnings you will make are displayed on the platform so you know how much money you will make. The risk is capped so you never lose more money than what you originally invested. The profits will not be affected by the price after the expiry. Binary trading allows you to make money on both directions of the price movement. You will make money when you successfully predict whether the price will go up or down by the expiry. In forex and stock trading, you only make money when the price of the asset is rising.
On average, many brokers allows you to earn between 80% – 90% on standard call/put options. Standard call/put options with long expiry time are safer to trade compared to one touch options. If you lose the trade, you may get back some of your money if the broker offer refund. You get to decide the amount of money you want to invest and you can also set the timeframe.
Constant Fluctuation of Price Due to the Economy
Binary options is risky because of the nature of the fluctuation of the economy of the country. There are a lot of factors that affect the price of the asset so you can never know for sure whether the asset you are trading will be profitable. The key is to have a good knowledge in the type of asset you want to trade if you want to have a higher winning rate. The lack of trading tools is another reason why many traders lose money in binary options trading.
Another reason why binary options is risky is because there are many scam brokers operating around. Scam brokers are usually new brokers that have not yet obtained licensed and has many negative reviews from previous traders. Scam brokers can lie by claiming that they are regulated and putting the regulated broker seal on their website. It is your responsibility to do research and determine whether the broker is licensed. If the broker is licensed with a recognized broker regulator, you will have to check whether the license is valid and not yet expired.
Complaints about these scam brokers can be found all over the web so if you just Google up a broker, you should be able to find out if it is a legitimate broker that operates as advertised. There are all kinds of complaints including customers who complaint that broker freeze their account for no reason, identity theft and the use of a software to cause traders to lose trades. To trade safely, you should always choose a licensed broker that has been in the binary options industry for many years. If the broker is recommended by many traders and review sites, then it is safe to say that the broker is legitimate.
Choose a Regulated and Licensed Broker
There are a few recognized broker regulators responsible for governing brokers in different countries. For example, CySEC governs brokers in the European Union while NADEX acts as a regulator for brokers that are operating out of the North America. The regulator will perform inspection on the brokers from time to time to make sure that they adhere to the rules. With a licensed broker, your money will be safe as it will be deposited in a bank with good standing. Besides, they will also offer insurance coverage for up to a certain percentage on the money in your trading account. You can get a peace of mind because the site of a reputable broker is secure and protected with a powerful encryption system.
Binary options trading carries risks just like other forms of trading but you can minimize this risk by increasing your knowledge. It is best to stick to trading with a licensed binary options broker that offers reasonable minimum deposit requirement, good educational resources and many trading tools.