Binary Options Do’s, Don’ts, Pros, Cons, and More!

https://www.bluntmoney.com/binary-options-dos-donts-pros-cons-and-more/

While binary options’ trading is a relatively new industry, one can’t discount the fact that it’s incredibly popular. The reality is that several traders are making an incredibly good living trading binary options online. So, you may be asking the question, “Is binary options trading for me?” Below, I’ll share the do’s, don’ts, pros, cons, and more to give you the information you’ll need to come up with an educated answer to this question. So, let’s get right to it…

Binary Options Trading Pros & Cons

As with anything else in life, there are pros and cons to trading binary options. Here they are…

Binary Options Trading Pros

  • Managing Loss Exposure – In most forms of investing and trading, it’s impossible to know how much money you will lose if your predictions are incorrect or how much you will gain if they are correct. However, in the world of binary options, there are only two possible outcomes. Either you’re in the money or out of the money, and you know exactly how much money you stand to gain or lose. This gives the binary options trader impeccable control over risk.
  • No Asset Ownership – When you purchase stocks, you actually purchase ownership in the asset. However, with binary options, there’s absolutely no asset ownership. So, you won’t have to deal with the headache of major drops in values costing more money than expected.
  • Incredibly High Returns – Binary options are known for having some of the highest return rates of all investments. It’s not uncommon to see return rates over 80%.
  • Exciting Environment – Because binary options’ trading is a fast paced concept, the trading environment is incredibly exciting.

Binary Options Cons

  • No Asset Ownership – While some may view the fact that now physical assets are owned as a positive thing, others will view it negatively.
  • All Or Nothing Investments – Although some brokers may offer a discount on losses on out of the money trades, it’s usually an all or nothing thing. Therefore, you earn the return, or you leave without your principal investment in hand; there’s no middle ground.
  • Regulation – Because binary options are relatively new, regulation in the industry still has room to grow. Nonetheless, there are already several binary options brokers out there that are regulated. So, if you decide to start trading, make sure to trade with a regulated broker.

Is Binary Options A Form Of Gambling?

One big argument against binary options is the argument that the industry is nothing more than gambling. Some would argue that without actually purchasing a stake in the asset, the trader is doing nothing more than guessing where the price of the asset will go and gambling based on their assumptions. However, I have to disagree with these statements. That’s because when you gamble, you have no idea what cards you’ll be getting, it’s all a game of chance. However, when trading binary options, you have the ability to do research and get a clear understanding of price movements. Therefore, you have a higher chance of predicting where the value of Apple will go than you do of getting a full house in a poker game. There’s simply no comparison between the two in my opinion.

Do’s and Don’ts

So, you’ve decided you want to start trading binary options have you? Great! There are just a few do’s and don’ts that you’ll want to keep in mind as you trade…

Do’s

  • Do Follow A Plan – No matter what type of investing or trading you plan on doing, you’ll want to follow a plan. A trading plan helps traders become more successful by taking the guess work out of the next move. By following a plan to the tee, no emotions can step in and eat away at your profits!
  • Do Your Research – As mentioned above, as a trader, you have the ability to research the asset and get an understanding of the asset’s price movement in the market. Taking advantage of this ability is what defines binary options as an investment rather than a gamble. Never make predictions without performing adequate research.
  • Do Actively Manage Risk – As with any other form of investing, there is risk involved in trading binary options. However, there are several strategies that are designed to help traders manage risk and loss exposure. So, do your research to learn about risk management and loss exposure management before you start to trade!

Don’ts

  • Don’t Let Your Emotions Get Involved – When emotions get involved in trading, you have a recipe for disaster. With that said, don’t let your emotions get the best of you as you trade.
  • Don’t Steer Away From You Plan – As mentioned above, it’s incredibly important to have a plan when you trade. While emotional responses to activity in the market could make you want to veer away from your plan, it’s important to stick with your plan at all times to be successful.
  • Don’t Make Blind Guesses – Many beginners make blind guesses in an attempt to see if they’ll earn money doing so. I can tell you in advance, you won’t! Do your research and get to know the assets you’re trading before you start trading.

A Great Beginner Strategy

If you’ve decided that you’re going to give binary options trading a shot, a good strategy to start with is called trend trade. The strategy is simple. All you need to do is follow the steps below…

Step #1: Spot Trends – Go to popular social trading websites like Stock Twits and look for the assets traders are talking about. Then, open up a candlestick chart to see if there’s a clear trend that the asset is following in the market.

Step #2: Take Advantage of The Trends – Once you find a trend, wait for it to change direction. For example, if a trend is going down, wait until it reaches the bottom and starts to bounce back. At this point, you would purchase a call option to take advantage of the resulting uptrend. Adversely, if the trend is going up, wait for it to reach the top and start moving down; purchasing a put option at this point to take advantage of the resulting downtrend.

Step #3: Rinse And Repeat – Once you’ve decided that you’re done trading one asset, simply follow steps one and two to find and capitalize on another trend.

Final Thoughts

Binary options trading is incredibly simple to do and can be incredibly lucrative. I hope that you’ve found all the information you need here to decide whether or not trading binaries is right for you. If you have any questions, please feel free to ask in the comments below!

View Comments (2)
  • Holy crap, this is actually a really good explanation of how it works. Usually you can’t read anything about binary options without it feeling like a sales pitch.

  • Thanks for explaining! However, I am concerned as to whether or not I have the self-control for this type of investing. :( Sad to say. Maybe I can still pull it off.

    I found you on Twitter, btw.

Leave a Reply

Your email address will not be published.

© 2023 BLUNTMONEY. All Rights Reserved | Disclaimer

Scroll To Top
Skip to content