We all are well acquainted with the age-long proverb “No risk, no gain”. Perhaps the proverb matches the best with Binary Options trading. People often ask, “Is binary options trading safe”?
Truly speaking, there is no clear-cut answer. Like Binary Options, the answer may be yes or no. Like every venture or business, Binary Options trading also involves risk. Accepting that risk is a safe approach to trading.
Yet, from novice to expert, all are interested in this trading. Moreover, this trading has gained momentum over the years.
Why Binary Options Trading Safe?
- First, we will dive deep into the elaborated discussion of whether Binary Option trading is Safe or not and the risks it carries with it.
- Let us first discuss how Binary Options trading could be turned into safe trading. Many of its unique features make it safe.
- It is not much complicated. On the contrary, it is a favorite of the traders for its simplicity. You have only to guess the movement of the index.
- Another reason that Binary Options Trading is safe and not risky is because of its divergence characteristics. Therefore, you may divert your balance. If in some cases, loss arises, you may balance it by another higher return.
- Binary Options Trading is safe because you do not need a huge amount to trade. You can even trade with a minimum deposit. You can make a conscious decision. Therefore, lessening the risk is in your hand.
- If you are a little bit researcher and your prediction about the market is correct at a certain point in time, and the day is yours. Of course, you should not be extensively wise like forex traders, but a little basic knowledge is vital.
- In the beginning, you may start with ‘simple call’, ‘put option’ or vanilla option, or exotic option. You should not understand the complicated terms but can expect a higher return.
- Gradually, you understand how the market works and avoid blind trading. In that case, the risk becomes low, and you will discover that Binary Options Trading is safe. Also, it is safe if you are a responsible trader.
Risks Associated with Binary Options Trading
With a shortcut way to make money, the risk goes hand to hand. No broker will create a market that will not be profitable for him. So, you have to approach accepting that risk. The risks associated with Binary Option are mostly with “Fraudulent Binary Options Trading Platforms and fraudulent brokers.
According to a U.S. Securities and Exchange Commission report, most binary options markets are operating trading platforms through the Internet. As a result, they do not observe U.S. regulatory requirements. As a result, they may be engaging in an illegitimate activity.
The SEC and CFTC receive numerous complaints of scams associated with Internet-based trading platforms. Mainly three types of fraudulence are involved.
- Refusal to credit the profits that the trader gain and repayment of funds.
- Theft of Customer’s identity. This type of fraud includes stealing customer’s information such as credit card and driver’s license data. If any trading platform wants information regarding your personal data says a big NO.
- The third category involves generating software to lose trades. In this process, they twist binary options prices and payouts. For example, suppose a customer’s bid is winning, then the software indiscriminately prolongs the countdown time of expiration. Thus, the customer loses the trade.
Should I Trade Binary Options?
After all these discussions, whether the Binary Option is safe or risky, the question yet peeps, should I trade Binary Options?
The answer is “yes”. Because it is legitimate and a budding market. But before you start, you have to be diligent as well. Not depending fully upon the brokers, you have to watch and study the market.
To be a successful trader, you must follow some guidelines.
#1 Choose A Right Broker First
To make your Trading safe, you have to be a little wise to choose the right broker. The broker must be a license holder and regulated. Business runs fairly as regulator pays close attention the market.
The broker should have reliable customer support available in various languages. In addition, the broker should offer live chat, ticket messages, phone calls, and e-mail services.
Check whether the broker gives a convenient withdrawal process. Dishonest brokers may also commit fraud. For example, they may refuse to pay traders with successful bids.
The top binary options brokers for beginners include Pocket Option and IQCent, among others.
Pocket Option offers a minimal cash investment, high returns, and a wide range of technical analysis tools. In addition, you can avail a trial account. This trial allows you to try out all of the site’s features without taking any risks.
IQCent is a user-friendly platform that gives a copy trading tool. This tool allows you to imitate experienced investors’ trades to benefit without having any prior trading experience.
In addition, IQCent offers a live chat service available 24 hours a day, seven days a week, if you need assistance with any of its tools.
#2 Exercising Option
The most common option is the “Up/Down” trade. However, there are some other types also available.
- High or Low – It is the most common binary option. It means that a price will finish higher or lower than the current price at the time of expiry.
- In or Out, Range or Boundary – This option sets a maximum figure and a minimum figure. Traders forecast whether the price will finish inside, or outside, of ‘boundaries.
- Touch/No Touch – In this case, the trader has to guess whether, within the expiry time, the real price will reach or ‘touch’ the defined target or not.
In the touch option, the trade can close before the expiry time. In that case, if the price level is touched before the option expires, then the “Touch” option will payout immediately, irrespective of whether the price moves away from the touch level afterward.
- Ladder – These options operate similarly to traditional Up/Down transactions. Still, instead of using the current strike price, the ladder will use pre-determined price levels (which will be ‘laddered’ successively up or down).
These are frequently different from the current striking price. Because these options typically require a large price change, payouts can sometimes exceed 100% – yet both sides of the trade may not be available.
#3 Choose Expiry Time Wisely
The expiry time is the trade closing time. The expiry time can range from 30 seconds up to a year. You should remember that you must sell the Binary options within their expiration time.
Expiries Are Generally Arranged into Three Categories
- Short Term –This type of trade expires in 5 minutes. You have to sell your Binary Options within 5 minutes.
- Normal – These range from 5 minutes up to ‘end of the day. It expires with the local asset market’s closing.
- Long term – It has a range from a day to 12 months. When the expiry exceeds the end of the day, it is considered long-term. The longest expiry time you may set is 12 months.
#4 Select Proper Asset for Trading
The asset lists are extensive, and they differ from broker to broker. However, most brokers offer options on well-known assets such as key forex pairings like the EUR/USD and commodities, stocks, cryptocurrency, and forex.
Commodities such as gold, silver, and oil also appear on the list. Although not every stock will be available, you will be able to choose from a pool of between 25 to 100 significant stocks, such as Google and Apple. As demand dictates, these lists continue to increase. Take, for example, the price of oil or the stock price of Apple.
If the broker is legitimate, he will clearly mention the assets on each trading platform, and most brokers will make their entire asset list available on their websites.
#5 Set the Size of The Trade
Remember, 100% of the investment is at risk. So, consider the trade amount carefully. You should trade or take risks not more than 5% of your capital. Seasoned traders’ risk 1% or less of their funds.
If you have 2000$ in your account, and you wish to risk 2% per trade, the maximum you may lose is 40$.
You have to write the trading platform’s $40 (for example) “Amount” box. You are willing to risk only $40.
#6 Keep an Eye on Pricing Patterns
If the price of gold has been rising for several days, avoid betting for a reversal. Similarly, if IBM shares have dropped and continue to fall, do not think that purchasing momentum will miraculously arise and drive the price higher.
When trading short-term binary, betting with trends is a sound strategy. Conversely, betting against the trend is to invite disaster.
#7 Avoid Cold Calls
Genuine brokers never make cold calls – they do not make themselves cheap in that way. The unregulated brokers make Cold calls. Their interest is only in getting an initial deposit or requesting personal data.
Approach very cautiously if you have by mistake joined such a company.
So, how safe are Binary Options trading? Yes, it is safe as long as your ambitions are in control. Instead, you control greed, don’t let greed control you.
Make a well-researched trade and ensure you have done everything you could to avoid misfortune. The dishonest and honest both will remain; this would not change overnight. This lucrative market is for everybody, but you have to proceed cautiously.