Binary options trading is surrounded by a number of facts and myths. But the truth is far from the myths that have been around since the inception of the industry. Traders who are into the industry or are looking to get into it must keep in mind that binary options trading is a financial activity that is well balanced and well regulated. It is a serious business for people who want to earn profits from online investments.
Those who don’t know much about the industry regard it as gambling, but the honest truth is that gambling involves betting against the other and in the financial market, you buy and sell directly from the market and the market doesn’t wait for any trade to make a trade. On this note, let us take a look at some of the myths and facts and binary options trading.
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Myth: The Value of Options is Lost Much Faster
Fact: It is true to some extent that the value is lost faster because the probability of any option to end in the money goes down fast. But, this is just the statistical probability. It is also possible that the option loses its value up to 90% before the expiry time and recovers during the final few seconds to end up in the money. A trader who makes the decision to step in during this time will make a profitable trade with a high payout.
Myth: Binary Options Trading is Very Risky
Fact: It is possible to lose your investment when trading binary options because it is indeed very risky. But the risk level is predetermined and limited and there is hardly any chances for the losses to go on and on that usually happened with spot currency trading and futures. So while it is risky to trade binary options, the risk is less compared to other forms of investments.
Myth: Spot Trading is More Profitable Than Binary Options
Fact: When there are market movements, regardless of whether it is just a small movement or a significant one, traders can earn anywhere between 60-1000% payout or even more. The good thing about trading binary options is that the amount you risk is fixed. With Spot trading, you have to risk the amount that you are expecting to win. Experienced and knowledgeable traders can turn their investment of $500 into more than $5000 over one or two months with one touch trading. This is not possible with spot trading. The spot market doesn’t allow traders to increase their balance by this much even if takes them one year.
In binary options trading, short term options are also profitable because a lesser degree of risk is involved. Forex traders in the spot market fail in just about 5-6 months because they end up losing their entire investment. On the other hand, traders who use the binary options market perform much better and earn better profits over the course of 5-6 months.
Myth: Binary Options Involves Brokers Trading Against Customers
Fact: brokers have to make sure that there is a balance between sellers and buyers in the financial market. They don’t dislike traders who make money. In fact they want traders to win because brokers are always protected. Whenever a trader wins, the broker has won a larger amount because there is always somebody who has lost a trade. Brokers also earn money from interests and service fees. They don’t have a reason to trade against their customers and it is in fact impossible to do so.
They don’t cheat their customers in any way because they have a zero risk profitability which is offered by the system. Moreover, there are specific regulations in place that doesn’t allow such activities to take place.
What Traders Believe:
Traders who don’t understand how the financial markets and binary options trading work usually blame the industry when they don’t make profits. They don’t understand that it is their inability to understand the process of trading that is making them lose money.
Myth: The Lockout Time Manipulates the Trading Process
Fact: in the binary options trading world, there is no manipulation. Brokers use a company policy where the lockout period is imposed due to the pricing model that is used by the company. There are also some brokers who don’t have a lockout period and also those who have reduced it. The decision to impose the lockout time is determined by the price models used by the brokers, but this in no way makes any difference to a trader who is winning money. The difference is made to losing trades only.
The broker doesn’t look at individual traders. Whether you are making money or losing money on trades, the broker only looks at parameters and collective data on the basis of which they impose the lockout time.
For many people, binary options trading is a big business. Traders are serious about their investments in this market because the industry is regulated and there the chances of making profits is greater than any other form of trading. Brokers don’t use any unethical practices or manipulation methods to mislead their customers. The financial trading world is risky and there is no doubt in that, but it is important for traders to understand the trading procedure and how the market works to be successful.
Usually, when traders fail to find success, they put the blame on the market or the brokers.
The financial trading market will always have losers and winners. Losers believe the game is rigged and winners believe that it is fair. It all depends on your understanding of the market, the decisions you make and what you are able to get out of trading.
There are many traders who base on their decisions on their experience and knowledge. They choose the asset they want to invest in, the amount they want to invest and how frequently they want to invest. The broker simple acts as a facilitator in between to help carry out the trades. New traders mainly lose money because they choose to trade more frequently and carry out trades which are harder to win. Basically, it all depends on the decisions traders make. Traders who fail to understand the risks associated with financial trading blame the market when they lose money. However, they don’t realize that they can increase their winning potential simply by recognizing the risks and making better trading decisions.