Binary options trading is rapidly emerging as the preferred method to trade by part-time and professional traders. However, what can be considered the main reasons why so many traders are switching from their long established trading platforms to the relatively unknown world of binary options trading? For all trader, whether full-time or not, weighing up what are the positives and negatives of each form of trading is essential for success. Equally, it is true to say that some traders own personal styles and methods are more suited to a particular way of trading and, in particular, different platforms and ways to speculate on the markets.
The major benefits of binary options trading
The overriding pro’s of binary options trading for many is the sheer simplicity and instant ability for any trader, regardless of experience, to begin speculating on the markets. This is due to the fact that binary options trading is known as all-or-nothing trading, a trader simply chooses either higher or lower for the options to expire after a certain time period. If the price closes correctly higher or lower than the execution price then the trader has a return of often around 85% of the initial investment. Furthermore, binary options trading offers a large degree of flexibility for all traders including the availability to purchase options during the weekend as well as different forms of options which can be successful if price reaches a predetermined price or stays within a range for the life of the option.
Comparing binary options trading to spread betting
Comparing spread betting, as an alternative to binary options trading, some traders see that there are also benefits beyond the simplicity that binary options offer. One of these benefits is that all losses and profits are predetermined with regular binary options and cannot be increased or decreased during the life of the trade. Due to this fact, it is unnecessary for traders to put stop-losses on their binary options trades and, in theory, the possibility of profitability lasts the entire life of the options. This is because binary options are not based on the degree to which price moves away from the entry price, whereas spread betting and traditional forms of trading have stop losses to close at a loss when price deviates too far from this.
Smaller deposits offer less risk initially
Regular forex traders have also migrated to binary options platforms over the past two years as its popularity has grown. Those new to trading who previously would have had to accumulate a reasonable amount of capital to be able to trade forex using margin see binary options as a much more highly accessible form of speculation. Accounts can be opened with as little as 100 GBP and risk can be managed which will mean that traders can never expect to get a “margin call” demanding more capital in order to keep a position open. Binary options traders can only use the available capital in their accounts, however, with small stakes being allowed by most platforms, a 100 GBP investment can, with care, be a good basis for profitable trading.
Problems with binary options trading
Of the notable pitfalls of trading binary options, the standout problem for many traders is the poor quality of the charting software provided by many binary options brokers. The quality of charting in comparison to both spread betting and forex is very low, although improving, and many technical traders find it difficult to trade directly of the charts provided. Furthermore, in the early days of new emerging binary options platforms, many found a slight but critical delay in the data stream created an inferior trading experience to spread betting or forex broker’s services. Thankfully, both of these are well on their way to being remedied and binary options trading has not faltered in becoming hugely popular and potentially very profitable.