Market Overview

Understanding The Growth Of The Binary Trading Market

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Understanding The Growth Of The Binary Trading Market

Binary trading has seen a rapid rate of incline over the last few years. This simplified method of investing reduces the need to spend hours researching and evaluating a stock's potential, resulting in an automated form of investment. 

The Growth of the Binary Trading Market

There are many factors that have contributed to the rapid growth of the binary trading market. In addition to the ease of trade that is available with binary, a 2008 ruling by the U.S. Securities opened up the market for those investors not involved with an institution. The American Stock Exchange and Chicago Board Options Exchange quickly followed suit and opened up binary trading to public trading. The ability to control risk and reward and the consistency among all binary trading has also contributed to the rapid popularity of the binary trade market.

Methods of Binary Trading

Binary trading derives out of computer lingo, with binary translating to 1 or 0, or one or the other. When evaluating potential stocks, you are simply predicting whether or not the stock will increase or decrease to a set amount, within a specified period of time. Choosing an inaccurate prediction will cause you to lose your investment and an accurate call results in a payout. 

While the exact amount of return on an accurate prediction varies, it is usually somewhere between 70 and 85 percent. Losses on an unsuccessful prediction are usually around 95 percent. You never actually own any of the stocks or assets but instead, are securing a prediction on how the asset will perform in the stock market.

Advantages of Binary Trading

Perhaps one of the biggest advantages of binary trading is the ability to control losses and to put a cap on the total loss. Additionally, there are no hidden costs and the risk is well-known ahead of time, avoiding any unexpected financial surprises. This does, however, also mean that the reward is also fixed. The ability to fix the risk at a set cap and know what is at stake is often appealing enough to ignore the disadvantages of a fixed reward. The risk cap is also limited to your initial trade amount, with a minimum of $10.

Binary traders also enjoy the simple binary trading platform. You only have two options available and once you learn the ins and outs of binary trading, it becomes an extremely easy way to navigate the financial market. You can also place your prediction much faster than when trading stocks, sometimes within 60 seconds or less. Finally, traders have more control over the time limit of their trades. They can choose a time frame that is fast, producing risk or reward within minutes or a timeline that extends to over many weeks.

Important Components of Binary Trading

Binary trading allows you to trade all types of assets including currency, stocks and other commodities such as gold. You can use a single platform to trade differing types of assets, including across international trades. While you have control over the time limit you set for binary trading, you are required to stick to that time period. Unlike trading traditional stocks, you cannot trade before that time period is up. Because of this, you will want to have your trade research completed prior to buying into the binary.

The Future of Binary Trading

With such a rapid increase in binary trading, many investors wonder what this means for the future. It is likely that this regulated and low-risk investment option will only see additional growth. However, the exact amount of growth will likely depend on the number of diverse trade opportunities that become available. 

While binary trading currently appeals to a demographic of safe investors, it might not be risky enough to meet the demands of those investors that prefer a little more volatility. Either way, one thing is for sure, and binary trading is here to stay.

You do not need to be a financial expert to participate in trading binary. As more people catch on to the advantages of binary trading, it is likely to only increase in popularity. For even more information about the binary trade boom and what led to its growth, check out this informative binary infographic below. 

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The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: contributor contributorsBinary Options Education Futures Markets Personal Finance General Best of Benzinga

 

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