There’s a great deal of conflicting information on the web concerning binary options. Many people claim they are virtually a licence to print money. Others say they are a sure-fire way of losing every penny that you have. The truth is obviously somewhere in between.
Here we address five common binary options myths, and point you in the way of the actual facts.
Binary options trading is not actually trading – not like ‘proper’ trading, such as forex
There are plenty of people who will tell you that binary options trading is some kind of myth. It’s a ‘fake’ financial instrument designed to suck you in and then suck money out of your bank account.
That’s true of some (bogus) brokers, but trading in binary options is undoubtedly a ‘real thing’ – why would brokers offer it otherwise?
The important thing in regards to binary options trading is to keep yourself safe. When you begin trading make sure any broker that you use is properly licensed – look for licensing from an authoritative body, such as CySec.
As for binary options trading not being ‘proper’ trading, it is no different in terms of trading ‘properness’ as forex trading. In forex trading you are buying currency to sell again when the price of the currency rises. In binary options trading you are investing money on whether the value of a currency (or asset, or commodity) will rise or fall. It’s two ways of looking at the same aspect of trading.
You can’t guess whether a price will rise or fall – it’s no more trading than flipping a coin
If you could never guess whether the price of a currency, asset or commodity will rise or fall, then there would be no such as trading. There would certainly not be any millionaire traders about, and Wall Street is full of them.
There are several ways you can guess whether prices will rise or fall – analysis, historical data and the reaction to economic news are just three. Trading of any description is a complicated discipline – it’s certainly more complicated than flipping a coin!
You need to invest big-time in binary options in order to make a profit
When it comes to binary options trading, you are not trading stocks – you are trading stock options. To begin a profitable career in trading stocks you will need a fair amount of capital – around $50,000 is a ballpark figure – in order to establish your trading portfolio.Photo by Bark
Trading options is different, as you do not need the capital in order to buy stocks – you just need the capital to buy options, and options are considerably cheaper than stocks. It’s possible to begin your career as a binary options trader with as a little as $100.
One thing is true though – if you trade small, you will profit small. Don’t expect to make huge profits with minimum investment – it just won’t happen. You should also remember that the more you invest, the bigger the risk.
Anybody can become a binary options trader
Well, that’s not entirely a myth. Anyone can become a binary options trader, but not everyone can become a successful binary options trader.
The byline is that a successful trader is one whom has the dedication necessary to invest their time in learning all the basic principles of binary options trading, and then puts them into practice.
There’s no excuse not to further your career and to educate yourself as a binary options trader. Hunt around the web for training articles, educational videos and support forums.
Binary options trading is too risky
Lots of people have an extremely low opinion of binary options trading. Some will not see beyond this reputation – that it is no better than gambling (not that there is anything wrong with gambling as long as it is done responsibly) or even worse, is simply a lure to get the unsuspecting to part with their money.
The main risk with binary options trading is that you may fall victim to a bogus binary options broker. We’ve outlined how you prevent this above.
As for the risk – that is up to you. With binary options you can only lose what you’re willing to invest. Set yourself a trading budget of $100 and you can only lose $100. With forex and other forms of trading, aspects such as margins (broker credit) come into play. One really bad trade and you can lose several times your initial investment. You could even find yourself liable for thousands of dollars or even worse.
Remember that genuine brokers are not here to deceive you – they would soon lose all their custom if that was the case. You can only ever lose as much as you are willing to lose, as long as you do not fall into the trap of chasing your losses, or over-investing.