Even though binary options have limits that prevent significant investments, it still has risks that follow this kind of trading. You won’t be able to lose hundreds of thousand dollars in individual trades, but you can lose it over some time. Like any other form of exchange, binary options also have good and bad things.
We will focus on advantages and disadvantages of binary options trading, and we will try to cover as much as possible. Even if software offsets some of the drawbacks, we will mention it. Click here to find out more about binary options software.
Advantages of trading options
Conventional exchange trading is complicated and requires a lot of involvement. Binary options are simple, and you can trade them with very little research. You will still need to do some basic research on the underlying assets, but it won’t take hours to decide whether it is smart to trade or not.
When you trade binary options, you have full control of the potential losses. That isn’t true for regular trading. If for example, you buy some stocks, their value may go down, and you might lose more than you invested (leverage). An option has a fixed price, and you can lose only what you invested in it. You also know how much you might earn so you can plan future trades with full knowledge about the resources you have for them.
A trader has complete control over the amount of potential loss when they trade options. If you don’t want to risk more than (for example) 500 dollars, then you just enter five trades. If you win some of them, you can enter new trades without risking more than the original amount. This controlled risk is unique to this exchange market.
Disadvantages a binary options trader has to face
One of the biggest disadvantages of this form of trading is the imbalance between win and loss percentage. Most of the trades that have a high chance of profit offer around 50 percent return rate. This means that you will earn 50 dollars for a trade that ends favorably. If the end of the trade is unfavorable, then you lose entire investment (100 dollars). The broker has the advantage in every trade you make, and that is something that will never change.
Many brokers will offer you software, but only a few will supplement you with trading tools. Only a few big brokers provide some basic trading tools, which is a sad thing. The solution for this is to download trading tools from third parties and use them. It will complicate a whole thing, but that is the only viable way to analyze assets and find good trades.
Only a few brokers will give you free demo account for practice. And when you enter that account you will find that it has a limited amount of virtual currency. This means that you can’t practice trading before you invest real money. Supplement yourself with knowledge before you invest your money to offset this inconvenience.