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Advantages And Disadvantages Of Trading Binary Options


Binary options trading is becoming more and more popular with every passing day, and for good reason. There are tons of people out there that are making their living from home doing nothing but trading binary options. However, as with anything else in life, binary options come with their own advantages and disadvantages. Today, we'll talk about the advantages and disadvantages associated with trading binary options and how you can tell if trading them is right for you.

Advantages Of Trading Binary Options

When trading binary options, there are several different advantages that traders seem to enjoy quite a bit. Some of my favorites include...

  • High Returns – One of the reasons that binary options have become so popular over the years is the fact that the trading vehicle comes with inherently high returns. In most cases, when a binary options trade expires in the money, the trader will earn at least 70% return on their investment. This is rarely seen with more traditional trading vehicles, but in binary options, it's seen every day. 
  • Exciting Atmosphere – Binary options, by nature, are a relatively short term trade. As a result, the trading environment is a very fast paced one. This ultimately makes binary options trading more exciting than other types of trading, at least in my opinion. Whether it's exciting to you or not, the fast paced environment creates several opportunities for profit in any given trading session, and that's exciting to anyone!
  • Simple This Or That Proposition – One of the things I like the most about binary options is that they are a simple this or that proposition. When trading binary options, you're making a bet with regard to whether or not the price of an asset is going to rise above or fall below a specific number. Before making the trade, you know exactly how much money you stand to lose, how much you stand to make, when the trade expires, and what needs to happen for you to realize profits. Ultimately, the certainty of these aspects makes trading binary options a relatively simple process.

Disadvantages Of Trading Binary Options

While there are plenty of advantages associated with binary options, like any other trading vehicle, they also come with some disadvantages. Those include...

  • Regulation – First and foremost, regulation is a huge one. The truth is that binary options trading is a very new concept. As a result, regulatory agencies haven't really caught on. So, most binary options brokers out there are unregulated, which can lead to a risk of being taken advantage of. However, there are some regulated brokers out there, and those are the brokers you should work with if you decide to trade.
  • Losses Are Big – One thing that can be a big drag for binary options traders is how losses work. When a trade ends out of the money, the investor loses 100% of the principal amount invested. This can hurt if you're making big trades. So, if you decide to trade, make sure to make smaller trades and watch your loss exposure.

Added Risk – Finally, because binary options trades are by nature short-term trades, there's added risk. After all, a prediction that has more time to come to fruition will likely be more accurate. So, keep in mind that this isn't a great vehicle for the risk-wary trader.

Final Thoughts

Binary options are a great investment vehicle that are used by many. However, it is important to consider the disadvantages. In this case, regulation issues, large losses, and increased risks are traded for huge gains, an exciting trading environment and a simplistic trading process. If that sounds like your cup of tea, you may just be the next profitable binary options trade!

Posted-In: Binary Options Markets


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