When it comes to stock trading, your investments are relatively safe and, for the most part, you know exactly where your money is going and the steps you need to take to increase it. Overall, the stock market is fairly transparent, and even some of the more complicated concepts are still easy to grasp and use to your advantage. That being said, one form of trading that is deceptively simple yet still an easy way to fall into the trap of losing money. If you have heard about binary options trading but are not sure of what it is or how it functions, use this guide to learn more about the trading method and whether or not it might be something you would like to engage in.
What is binary options trading?
To put it simply, binary options trading is a trading method in which a trader will place money on a bet as to whether or not a given asset will be above or below a certain price at a specific time. Depending on whether or not you believed the asset would go above or below a certain price point and whether or not that prediction was right, you could walk away with a profit or you could lose all of the money that you invested. While some investing goes into the process, binary options trading is generally considered gambling more than it is considered proper trading.
How does binary options trading work?
Binary options trading is relatively simple. To begin with, you typically choose a certain asset on a trading website. Depending on the type of binary options trading that the platform decides to use, you will be given a question such as, “Will this asset reach this price point by this time?” If you believe that the answer to the question will be a yes, you can buy the binary option. If you believe that the question will not deliver the desired results, you can sell the binary option. Every binary option price falls between $0 and $100, and regardless of whether you are right about your yes or no, you make the difference between that sell or buy and the $100 cap. If you are wrong, you lose all the money you put down on the bet.
Is binary options trading safe?
While reputable trading sites out there allow this type of trading to be conducted safely, potential users should be aware of some key things. The biggest issue in this industry is fraudulent trading platforms that do things such as holding onto and refusing to disburse earned funds, using sensitive personal information entered into the system to steal identities, manipulating the software so that the users of the platform lose the trade even if they were correct about the outcome, and promising better returns than are actually provided on the platform. (This form of trading has been banned in Europe but is available in the U.S.) Don’t let these types of problems deter you if you are interested in trading binary options. Simply be aware of the potential risks and make sure to do your research before you dive into any platform.
Those who are new to the concept of binary options trading can be confused when they first hear the term, but once it is explained, it is easy to see how it works. If you are interested in trading binary options, but you need a little more info before you begin testing the market, use the guide above to better educate yourself on this type of trading so that you know what to expect when you begin trading binary options.