Business Tips

Binary options trading has recently become the most captivating form of trading. Nevertheless, it is relatively new in the field of trading and is heavily advertised as a quick way to earn huge sum of money, giving a feeling that whether it is a safe thing to undertake or not. Binary options trading is based on simple concept of all or nothing options. Due to the simplicity of trade, binary options trading has grabbed the attention of many traders. However, not to forget that there is no financial market that is free from the uncertainty Moreover, the gamblers are actively taking part in trading but they are highly impatient and have no idea about the complexity of the market. They invest blindly without spending time in understanding the techniques of making consistent money. But not all the traders are same and there are many who are well-informed and trading well.

The question arises about the safety of the binary options trading platform. Is it safe or not? The answer lies as to how to explain it. If a trader thinks that the binary options trading is free from any form of risk, then it is not true. Binary trading is subjected to some forms of risks. Just like any other business, the binary trading has some measured risks that are known to the traders. Even in the presence of the most extraordinary technique, the chances of risks cannot be removed. But the best thing is that all the risks are well determined and known to the traders. Thus, the answer of the question depends upon the trader and how he understands the trade.

Without determining the several types of risks involved in binary business, traders can make a big mistake to invest in it. It seems like gambling for the trader without considering the possible risks, and the end result would be a complete loss. It is rubbish to think that there is no involvement of risk and the trader has all the skills to deal with it without even acknowledging it.

The other part of the answer is the type of the broker that a trader has chosen for the binary options trade. The platform of binary trading has become famous in the international world of trading lately and it is the reason why all the brokers are not yet regulated. Some of the brokers are in the process of regulation and there are few who are not serious in making their platform regulated. Thus, always choose the broker wisely to make a safe and sound bet.

Learning how to trade the financial markets including some of the world's major indices like the Dow Jones, FTSE100, S&P500 and Dax and Forex markets such as the British Pound and US Dollar can to a newbie seem somewhat daunting and above all, risky.

The main reason for this is due to the popularity of products such as spread betting and futures which offer at least on paper the potential for huge returns. However in reality they are totally inappropriate for a new trader. If these products were cars for example and you were a new driver, it would be like you having to drive a high performance sports car immediately after your test. Although on paper it may be hugely enjoyable the risks of you losing control and crashing would be very high indeed. Likewise in trading, futures and spread betting are highly leveraged products which expose you in theory to an unlimited loss.

Of course there are stops that you can deploy to avoid disaster but even these can be vulnerable in highly volatile markets.

So what is suitable for a new trader?

Well simply there are some excellent products available under the names of Binary Trading (Binary bets - Binary options) and Financial Fixed Odds. These products have become more popular in recent years and really are an excellent choice for new traders and even those more experienced.

The reason why they are such an excellent choice is very simple. These products deal with a fixed amount won or lost which is known from the outset. This simply means that you will know from the start of your trade the absolute maximum you will lose if things go against you and the amount you will win.

These means protecting your account becomes much easier.

Here's how binary trading is the safer, better option:

Let's say you wish to day trade and you think that the market on this day is going to rise overall.

You open a binary bet / binary option and are quoted a price of 48 for the Wall Street (Dow Jones) market to close higher for that day, for example. You decide to risk $10 per point. Binary bets work on a price of 0 - 100 which means that if you win, you will earn 52 x $10 i.e. £520. This figure is the 100 points - 48 (cost of the bet) x the amount of your stake, (being £5).

Now let's instead say we opened a spread bet or futures trade and the market stands at 10200 and again you choose to risk $10 per point, expecting the market to rise. For every point the market moves up you gain $10 and for every point the market moves down you lose $10. Let's also say you place a stop at 10000, just in case the market should move down, against you.

With the binary bet you need not care how far the market moves one way or another. All you need is for the market to close higher by the end of the day to win.

With the binary bet you know your maximum win being 52 x $10 = $520 and your maximum loss is 48 x $10 = $480.

The spread bet is a different story; your whole level of profit or loss is totally dependent on how far the market moves during the day. If the market, for example, dropped in early trading and you hit your stop at 10000, that would be the end of your trade and you would have lost $2000 (i.e.: 200 point drop to your stop x $10 per point.)

Even if the market did close higher without hitting your stop first and closed at 10220 your win would still be less than the binary bet, as your win would be 20 x $10 being $200, whereas the binary bet would win $520.

So it's easy to see why Binary Trading with binary bets and binary options offer an excellent starting point for new traders.