Binary options trading has been an active player on the world’s trading arena for quite a while, with its popularity and market potential constantly growing. Often considered as a simple and easy form of trading, the binary options industry has strengthened its position on the international market.
What are binary options?
The name itself suggests that there are only two possible outcomes – win or lose, as simple as that. The ‘binary’ part finds its origins in IT and stands for 0 (false/wrong) and 1 (true/correct), which are the only possible outcomes of a binary options trade. A typical binary options trade would go like this: one picks the price of any asset (currency pair, indices, commodities or international stock) at any time and makes an assumption as to whether the price will go up or down over a predetermined period of time. Based on the guess, the trader would bet an amount that they got the trend right and if they are correct, they win back their investment plus the pay out percentage that was defined at the time of the deposit. If the assumption is wrong the trader receives nothing and forfeits their deposit; with binary options trading it’s all or nothing.
Binary options trading as a financial investment
Binary options have become an entertaining and exciting form of investing, with significant profitability and returns. It is a simple, effortless and efficient way to trade on the financial markets, combining low investment with fast returns:
- Fixed price and fixed returns – binary options are the perfect financial tool for beginning traders with limited or no financial skills and knowledge. As a limited risk spin-off, binary options are an intuitive way of trading in which one can never lose more than the cost of an option.
- Flexibility of trade – investors can trade on all markets with any financial instrument (currency pairs, indices, commodities, etc.). They are easily accessible and especially popular outside office hours, thus giving traders flexibility to trade anywhere, anytime.
- New approach to classic trading – binary options trading is a new form of investment vehicle, allowing one to gain profit from the stock market on any market condition.
Investing or playing roulette
Over the past few years binary options have been criticised to be pure and simple gambling camouflaged as financial trading. Is the intelligent guess actually a bet in its purest form? Binary options trading can surely be seen as sheer gambling in some cases:
- 60 second expiries – a type of trade which promises traders a fixed pay out if they make the right educated guess as to whether the price of an asset will go up or down in the next 60 seconds. In both theory and practice, one minute is not enough time for a trader to analyse the market and to predict its behaviour within the expiration time and thus turns the financial investment into a gambling experience. It’s just like playing a slot machine, with all the excitement that comes from gambling on an unpredictable outcome.
- Trading without analysis – most binary options brokers do not provide trading gadgets such as charts, technical tools or news on the market move, which help a trader analyse the market. The trades resemble playing the roulette table and betting on black or red, with a 50/50 chance to get it right.
- Simplicity of trading – traders do not need to have a firm grasp on the inner workings of the increase/decrease of an asset price. Most traders are making uneducated trades by choosing on a market condition, without performing research, applying a trading strategy, etc.
As always, the coin has two sides. For some, binary options trading is a fun, new alternative to traditional investing. For others it’s just like gambling, it takes as much skill as playing on a slot machine; none. Is binary options trading a financial instrument allowing investors to trade with fixed price and fixed returns or is it a betting tool for achieving uncertain outcomes based on pure luck or chance? We’ll leave it up to you to decide. Unlike with binary options trading, there is no right or wrong answer.
Because of its popularity and constantly growing market many online business owners decide to establish binary options trading websites. If you are a merchant planning to do so we can help you set up a binary options merchant account. Contact our team at email@example.com