In the world of binary options, currency pairs are the most highly traded assets, but this doesn’t mean that they are necessarily the best for you to create a profit with. There is a lot of potential with stocks on the binary market, mostly because the point of entry is so low and the profit rate for a successful trade is so much higher than the majority of stocks will ever return over the course of several years.
There are several reasons why you can benefit from trading stocks through binary options over the short term, and a few reasons why it’s not always the best idea. Carefully consider these things before you decide to go one way or another, and then ease yourself into whatever method of trading you decide to go with.
Getting to Know the Positives
First, binary options give you more range of motion. You can trade currencies, but you can also just as easily trade stocks, indices, and commodities from the same site, all without using a different broker or changing formats. It consolidates everything for you, and it gives you many more choices than a single asset type broker can achieve.
Also, binaries do not have a necessary fee associated with them. Yes, you will eventually pay to trade them, but only if you are incorrect in your predictions. This is because there is a gap between the profit and the loss rate, but in theory, if you are never wrong, you will never pay to sue them. This is a luxury that no other type of broker will allow you to use, and it is definitely to your advantage as long as you are aware of the fact that this is taking place and account for it. As long as you are correct often enough to compensate for your wrong predictions, this is easily overcome. For example, if you lose 100 percent on your wrong trades, but only gain 80, you need to figure out how often you need to be right to offset this gap.
Another advantage to binary options is that you can minimize how much you risk. To make a worthwhile trade in the stock market over the course of a few hours, you would need to invest hundreds of dollars or more to make sure that you are able to compensate for commissions and tiny amounts of change. A binary option has a set rate of return and you know it before hand. If the trade you are making in the stock market only goes up 1 percent, you only profit that. But in binaries, if the trade goes 1 percent in the right direction, you still profit 80 percent.
There are Some Negatives
Realize that binaries are not right for everyone, and they are not the only tool that you should use for growing your money. There are plenty of other investment and trading methods that can benefit you. For retirement, things like IRAs, Roth IRAs, 401(k)s, annuities, and mutual funds all can be great tools for growing your cash over the long run. This is not what trading is for, and it helps you to add a big layer of protection to your cash since it can’t be touched easily until you reach retirement age. Trading allows you to grow your money over the short term, but there is much more risk with it than there is in investing with a retirement tool. A good trader that uses the right learning methods (such as a demo trading account) to keep their ability progressing forward will have a big advantage over others, but they still need to have long term protection in place. A binary demo account cannot achieve any of this alone.
One last negative to binary options is that they are usually all or nothing. If you’re wrong, you can’t pull out of the trade early and take a partial loss. You can do this with stocks and if you have a large enough bankroll, the losses will be minimal. True, there are some binary options brokers that do offer you the opportunity to profit off of losing trades with insurance policies or rebates, but these only go up to 15 percent of what you risk. It is a big help for most people, but again, it’s something you will need to consider. Also, for some of the longer term binaries, you are able to end trades early and take only a partial loss or profit, depending upon whether you are in the money or out of the money.
Making Your Decision to Trade
Binary options aren’t for everyone, and they usually shouldn’t be the only type of market exposure that you have. For those that it does work for, though, it allows you to trade short term with little upfront expense. They are great for those that want to start small and work their way up, something that no other type of trading will allow you to do. You can open an account for $200 to $500 in most cases, and you can make worthwhile small trades with just this amount. It’s great for beginners and those with experience that are looking to increase diversity in a unique way.