Contents
- 0.1 You can make money whether the markets are trending or not
- 0.2 Investing in binary options doesn’t require a huge investment
- 0.3 Binary options offer a fixed return
- 0.4 The maximum you can lose is the amount placed on a trade
- 0.5 Trading options is easy to learn
- 1 Pros and Cons of Binary Options Trading📈📉
- 2 Frequently Asked Questions❓
- 3 GENERAL RISK WARNING
Financial traders have a diverse range of markets to choose from. These includes forex, stocks, CFDs, indices cryptocurrencies and options. Binary options are relatively new compared to other financial instruments (except cryptocurrencies). However, many traders consider them high risk. Some will even label options trading the same as gambling.
The truth is, any form of financial trading involves risk. Money can be made or lost regardless of the type of financial instrument you’re trading.
As more traders realize this fact, they’re turning to options trading as a way to make money. Online options brokers are now attracting millions of traders from all over the globe.
But what’s making binary options so popular? Below are six reasons.
Key Takeaways🔑
| →Binary options trading is becoming increasingly popular due to its potential for quick returns and ease of learning. |
| →Options trading offers fixed returns, allowing traders to know their potential profit before entering a position. |
| →Losses are limited in options trading, with the maximum loss being the amount placed on a trade. |
You can make money whether the markets are trending or not
Most financial markets will only make you money when the markets are trending. For example, if you’re trading stocks, you can only make money if the price goes up or falls relative to the strike price. In addition, the price change must be significant enough for you to make a good profit.
Binary options are much different. All you need to do is predict whether the price will be higher or lower after a certain amount of time. Since options have a fixed return, a small change such as 0.001 in the direction you predicted will earn you profits of up to 90%. This comes in handy when markets are ranging. That is, the asset’s prices are experiencing small price movements.
Investing in binary options doesn’t require a huge investment
One of the reasons why options brokers are increasingly becoming popular is the low deposits they require to get started. You can easily open an binary options trading account for as little as $5. In addition, you can open an options position with as little as $1. With returns of up to 90%, a $1 trade can make you $.90 within a short amount of time.
Assets such as stocks and cryptocurrencies bought in exchanges require a huge investment. For example, if you wished to buy Bitcoin, you would need to pay at least $5000 for a single coin. In addition, you don’t know whether the Bitcoin value will increase in the near future.
Binary options offer a fixed return
Another reason why binary options are so popular is that you know the potential profit even before you open your trading position. This is calculated as a percentage of the amount you invest in a trade. Most platforms offer returns ranging from 60% to 95%.
The return depends on the assets you’re trading and volatility. This means that returns on a particular asset will change during the day. Knowing this, you can easily choose to trade during sessions where your trading platform offers the highest returns. This ensures that even if your trades end up losing, you can easily recover these losses through several winning trades.
The profit you might earn when trading other financial instruments largely depends on the asset’s price movement. If the price moves further in the direction you predicted, the higher your profit and vise versa.
The maximum you can lose is the amount placed on a trade
In addition to knowing how much you can earn through profitable options trades, you also know how much you stand to lose even before you enter position. The maximum amount you can lose on an options trade is your trade investment. Some brokers such as IQ Option also allow you to exit trades before they expire.
If the trade was turning a profit, IQ Option will give you a portion of what you were to earn. If it was losing, a portion of your trade investment will be deducted. This is called profit after sale. For example, if you had invested $10 in a trade with 80% return and the trade goes your way, you might decide to exit before trade expiry.
In such a case, IQ Option could give you $3 to $5 as profit and keep the remainder. If the trade was losing and you decide to exit, IQ Option might deduct $3 to $8 from your initial investment. This allows you to avoid losing the whole $100 investment.
When trading financial instruments such as forex and commodities, you stand to lose more than your trade investment. If the trade goes against you, your percentage losses might exceed 100%.
At this point, your broker will use your account balance to keep the trade open. That’s why it’s always advisable to use stop losses when trading such markets.
Trading options is easy to learn
Some traders will argue that options trading is hard. But this isn’t the case. Options traders will use the same charts, tools and trading strategies used by traders in other markets. In order to succeed as a binary options trader, you must learn how to read charts, use indicators, have a trading strategy and understand trading psychology. Traders in other markets must also do the same.
The interesting thing is that, traders who have experience in other markets such as forex often find options trading quite easy.
Pros and Cons of Binary Options Trading📈📉
Pros:
- 🎯 Quick returns: You can potentially make a profit in as little as 1 minute.
- 💡 Easy to learn: Trading options is easy to learn, especially for those with experience in other markets.
- 💰 Fixed returns: You know the potential profit before entering a trade.
- 🛡️ Limited losses: The maximum you can lose is the amount placed on a trade.
- 🌐 Trading in multiple markets: Binary options allow you to trade a wide variety of financial instruments.
Cons:
- ⚠️ High risk: Binary options are often considered high risk due to their all-or-nothing nature.
- 🏦 Unregulated brokers: Some binary options brokers may not be regulated, leading to potential scams.
- 🧠 Overconfidence: Quick returns can lead to overconfidence, resulting in poor trading decisions.
- ⌛ Short-term focus: Binary options trading can encourage short-term thinking instead of long-term investment strategies.
| Benefits of Binary Options | Challenges of Binary Options |
|---|---|
| Predictable returns and losses | High-risk nature of the trades |
| Quick profits possible | Potential for overconfidence and poor decisions |
| Low initial investment required | Unregulated brokers and potential scams |
| Ease of learning for beginners | Encourages short-term focus |
You can earn profit in as little as 1 minute
In most markets, you’ll have to wait until the underlying asset’s price reaches a predetermined strike price. This can take seconds, minutes, days or even weeks. Binary options are designed such that you can make profit in as little as 1 minute (Note: we don’t recommend trading short expiry times).
The reason for this is that options are set to expire after a specified period. In addition, all you need to predict is whether the price will be higher or lower than the strike price upon expiry.
That’s it about why binary options are popular. Do you have any additional reasons why we should trade option with IQ Option? Kindly share them in the comments section below.
Best of luck in your trading!
Frequently Asked Questions❓
- Q: Is binary options trading the same as gambling?A: While some may view binary options trading as a form of gambling, it is a legitimate form of financial trading with risks and potential rewards, just like any other market.
- Q: How much money can I make trading binary options?A: The potential profit varies depending on your investment, the asset you’re trading, and the platform you’re using. Remember that there is no guarantee of profit, and trading always comes with risk.
- Q: Can I lose more than my initial investment in binary options?A: No, your losses are limited to the amount you place on a trade. This is one of the advantages of binary options trading.
- Q: How can I improve my chances of success in binary options trading?A: Develop a solid trading strategy, learn to read charts and use indicators, and practice proper risk management. Additionally, stay informed about market news and trends.
- Q: Can I trade binary options on any financial instrument?
A: While many financial instruments can be traded using binary options, not all assets may be available on every platform. Check with your chosen broker to see which assets they support.