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Risks involved with binary option trading


All business and financial investments have some risks, especially online trading opportunities. Even though there is a way to reduce some of these risks, you cannot avoid them completely. Trading in binary options carries a tonne of risks. If you are trying to invest in this kind of trading, it is important to familiarise yourself with the benefits as well as the risks. Research will help you gain knowledge on the type of financial damage you can cause and how to avoid it.

Here are some of the risks involved with binary option trading

The marker risks

Just like any other investment, the binary option trading can experience a huge market risk and although taking out a personal loan to finance your investment can seem like a high risk, if it pays off you can pay the loan off and continue investing with your profits!!  Markets have the ability to fluctuate depending on the market structure and other directly related factors. This means they can move in different direction at different times. Investors in binary option trading have minimal ways to predict the market fluctuation. Even though people can predict these movements, there is no way of actually telling if they will accurately take place.

The risk of a fixed profit amount

This is another serious risk that you should be aware of even before you start trading in binary options. In a case of fixed profits, the investments are capped, meaning the gains have a limited potential. The up side is, the losses face the same fate, which means you will make fixed losses as well.

The profits and loss points in binary trading are precise

Binary option trading is not like any other trading investment. They are measure even with the slightest points. Binary option values can be determined by so many decimal points. In most cases, even three to five decimal points may be the difference between a win and a loose. Often, this causes a huge difference when trading. For instance, 0.00002 points can be the biggest difference between a profit and a loss on your side.

They are not liquid investments

Unlike other investments, binary options are not liquid investments. This means that as a trader, you will not have the ability to run your trading and investments at your own will. Additionally, you will have to wait until the expiry dates of the options so you can be able to take the profits or even losses.

There is no ownership of assets

Even though you have the access to some of the assets in binary trading, it does not mean you have any ownership. Binary options simply provides a wager to the assets, you are not actually investing to owning any kind of tangible items. This may be a form of investment for others but it is a potential risk for most people

The regulations are minimal

This is one of the most concerning risk in binary trading. Most binary trading markets are not big on regulations, which is a risky deal for investors. This only means that even though most platforms are presented well, you will run into a few with some abnormal activities.

You can minimise these risks by using a good trading strategy and choosing a broker that will help you minimise some of the risks rather than help develop them.

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Rules to help you be a smart binary options trader

Investing in binary options can be a good and bad thing. If you are inexperienced, you could end up spending all our finances on loses. To curb this, you need to do some practice on a demo account as well as follow some basic rules.

Here are some simple rules to help you make smart choices during binary trades.

Plan out the risk exposure

When trading, you want to make the best out of the experience and create profits. One of the first rules you should follow is thinking logically and planning out your trades before engaging in binary options. This will help you avoid some of the risks associated with binary trades. High risks can affect your finances and make you lose your investments. Do not underestimate the binary trading game and ensure you are working on getting high trades

Follow some binary trends

The good thing about binary options is that some market trends can be predicted. Although it not always a good idea, it is the best chance you can get. Some trends can last longer than others in the market and therefore they offer you an opportunity to make clear decisions about your binary options. Technical trends are considered more short term and are suitable for an immediate action. Following a trend will only make sense if signs of reversion have not been presented.

Consider binary options as an art

Most people venture into binary trading because of the profits and advertisements they see online. In the real sense, binary options require a lot of enthusiasm and involvement. Technical trends fundamental trends and strategies have the potential to secure you some positive binary outcomes but it is not always the case. Binary option is not scientific and has its basic rules. People and computers are also involved in the exchange. This means that you should uphold all the rules, while incorporating your strategies at the same time to make it work.

Always know your entry and exit points

These are very important factors when it comes to binary trading. They determine the kind of moves you makes. Mastering the points of entry and exit is a strategy to know future price changes. You can do this b mastering the technical movements and reversion in the binary trades. Movements can be as a result of any market factors like interest rates and government profits.

Be patient

One of the biggest mistakes people make is letting their emotions take over them during a binary option trading. One thing you should keep in mind is that huge profits aren’t made immediately you sign with a binary trading broker. Use risk management strategies before and during your binary trades to help you minimise all the risks involved. When you are following a trend, ensure you know all the risks involved and you are ready to take the challenge.

Money management is important

It is important that you know how to manage your finances before you start trading. Making big trades with all your finances in the binary account is a huge risk. There is a huge possibility that you will lose everything and have to add more finances. Always be wise when making trades and following technical trends; the goal here is to make more profits than losses.

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What are the benefits of binary option trading?


There is a lot of online evidence that binary options can be a change in your financial path. For beginners, binary option trading may be a little complex. However, if you have some knowledge on stock trades then binary options will be a walk in the park for you. Many stock rules can be applied to the basic binary option trading. If you make informed choices, have knowledge on the rules and know the right strategies to use, you are sure to make some benefits out of binary option trading.

Common benefits of binary option trading

There is a potential for high returns on the investments

Even though there is a high risk on the investment, there is an equal risk in returns. Investing your finances in binary trading can yield a lot in returns, especially when you use the right strategies. The average returns for many binary option trading is about 50 to 90% which compares very high to the 10% in foreign exchange trading.

The risks and rewards are familiarised

There is open information on how much you can profit from and how much you are risking in binary trading. The best thing is that there is no leverage risk meaning the amount of money you put in a trade is the exact amount your risk losing.

There are returns even when you lose

Even though the returns and payouts of binary option trading are high, the risks may be higher. In fact, they are very high compared to other trading and investment options. Some traders will offer some percentage of the money that you lose in a binary trade to help minimise the trading risks. Practically, you will not lose 100% of the money you invest in a binary trade.

The system is not complicated

Unlike other trading sites like the foreign exchange trading, the binary option trading is easy to understand. This is perfect if you are inexperienced in such investments. Binary trading has user friendly sites and the features on the main accounts resemble those of the demo accounts. Also, advertisers offer live chats and videos that are informative about binary trading.

Some brokers offer free trading accounts

Signing up for binary trading has been made simple because many brokers now offer a free entry. The money you deposit into your new binary account will go into your trades rather than the broker’s charges. However, some brokers may charge you a fee for signing up for their demo account which is not a bad thing for a learning opportunity.

You can trade a variety of assets

Binary trading is not all about finances, there are a number of different assets than can be traded in such a market. This gives you an opportunity to create diversified risks and investments. You can also access more assets like expensive stocks, which can be a financial investment.

Easy to understand and make money

There are different binary option levels you can invest your finances in. Some require a high level of risks than others. It is easy to understand, making it easier for anyone to sign up and win.

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Everything you should know about binary options

Binary options have been available long before other trading options emerged. There are several ways to trade in the online financial market but so far binary options are one of the fastest growing. Even though it is one of the fastest ways to trade, it is not the most effective. Binary is different from other forms of trading in that there is n ownership of assets and the rates are very high.

How does binary work?

The simplest explanation is in its name. Binary can only go in two directions you can either get it right or wrong during trading; there is no in between in binary trading. This makes binary easy to understand, especially for beginners in such investments.

What you do is select an asset and place a prediction on whether it will go up or down in price.  With this, you commit your finances and your broker places a percentage amount of your potential winnings. After you have selected the amount of money you want to risk in that trade, you execute it and wait. Binary options offer you the benefit of having more information on the conclusion of your trade compared to most other trades. You have information on how much you can gain or lose when the prediction goes either way.

To start, you need to select a broker, go through their rules and deposit money using your bank account, credit or wire transfer. If you are a beginner, you can always start with an informative demo account.

What can you trade in a binary option?

The best thing about binary trading is that you are not limited to a single place. You have the opportunity to trade with all the major currencies, indices, commodities, and stocks. You have the opportunity to trade different currencies from completely different parts of the word all within one platform. It is completely possible to trade your options on an international scale with the same broker. The broker brings together all your trading needs and destinations into one platform.

How long binary trades last

Binary trades are not timeless and they do have the same timeline. You should keep in mind that each trade has a strict timeline and deadline that you should pay attention to while trading.  Some trades can have a long timeline while others will last a short while. The good thing is, you can decide to trade on the timeframes that will work best with your schedule.  When you don’t like making trades with long timelines, you can go for a 5 minute trading option. One important thing to keep in mind is that the times are adopted immediately you commit your finances to the trade. Once you have committed, you have to wait.

Binary option types

There are three main types of binary options; put trade, touch trade and boundary trade. Finding the best binary option for you will depend on your experience and expertise and goals. If you have been trading on foreign exchange and other websites then you can transfer that expertise to the binary options. With binary trading you will need to create a plan and ensure you know what your goals are this way you can work towards meeting that specific goal.

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Common mistakes to avoid in binary option trading


Binary trading has a lot of opportunities, many advertisements and companies will try to entice people into joining this trading world. We have seen people win rewards and make high profits off binary trading. It is obvious that binary options can yield a lot of profits, but you have to be a pro in order to reach this level of achievements.

Below are some few tips on common mistakes made by traders and how you can avoid them

Having unrealistic expectations

Advertisements and marketing strategies by traders may lead you to put all your trust in their binary trading. Constant advertisements about wins may lead you to have unrealistic expectations concerned with this type of trading. They will make you believe that trading is easy, but that is not the case. If you do not join and trade wisely and with a reliable plan, your finances may go to waste.

Ignoring the demo account

Sometimes, people see shortcuts as useful when it comes to trading. Don’t be fooled, these are just some experienced individuals. In this case, if you are new to the trading business, you must take the longer path. Demonstration accounts will help you learn the basics about binary trading. This will help you to take less risk while trading and protect your finances. The demo account might also help you learn a few strategies that you can use in your main account.

Trading without a plan

Trading is like a business. Starting any kind of business without any serious plan is like setting yourself up for failure. You should always have a plan no matter how lucky you think you are with this kind of business. Trading without any form of strategy to guide you through the sessions, you will have minimal chances of making any wins.

Managing your money poorly

When you join binary option trading, you should be able to spend carefully or take good care of your finances. Not all people can be careful when it comes to making a deposit and trading. Most beginners will spend more money than they should in the hopes of making a profit with the first tries.  Learn more about money management and the strategies in binary trading before you start depositing any finances in your account. This, together with skills that you pick up along the way will keep you from loosing most of your money.

Over trading

Most people who lose their finances in binary trading often have fallen into the overtrading trick. This involves putting in too many trades over a short period of time with the hope of gaining multiple profits. This always results in a fail rather than a win. This can be avoided by making trades only when you are sure your strategy has a high chance of a win.

Trading with the wrong broker

Always ensure you look out for fraudulent accounts when you want to start out binary trading options. Some brokers will attract traders using big money and ensure they clear out the accounts once you deposit the finances or make big profits.