Is Binary Trading Safe?
The overall concept of binary options trading is to provide a simple investment possibility where traders only make a prediction on whether the price of an asset will be above or below a specific price after a certain time. The only outcomes are ending up in the money (profit) if the strike price is met or out of the money (loss) if it is not.
Like any other financial instruments, trading binary options bears some financial risks that all traders should have in mind if they want to stay on the safe side. Here are some often
Capped profit and loss
It is important to note that 100% of the initial exposure is lost in case a position expires without hitting the strike price. The possible losses while trading binary options can be great, especially if someone places huge sums in a trade and the strike price is missed. Conversely, traders only receive the agreed payout even if the prices rise much higher than the strike price.
Precise profit and loss points
Unlike many other financial trading vehicles, binary options have a strike price that uses precise ticks or points. In other words, with binary trading, being 0.0001 points off the mark means that the strike price was not reached resulting in a losing trade. This is disadvantageous in comparison to traditional financial trading where profits or losses can be realized as soon as the ticker starts to fluctuate.
Added psychological risk of
Good brokers allow traders to manage trades while they are still open. For example, they can allow investors to close trades before the agreed time or rollover (postpone) the expiry date. While these conditions are meant to help manage traders’ profits, they can be of great disadvantage to
Risk of scammers and dummy websites
Because all binary options trading takes place online, the industry has been a prime target for scammers. The trading is not always regulated and therefore many scam websites and apps exist, yet it is still hard to tell a scam from a legit website. Some obvious signs of a dummy binary trading website include deposit offers that sound too good to be true and the lack of a demo trading feature. Most of these sites only want new investors to deposit money quickly and there goes the money. A quick online search also reveals that they are tied to very many scam warnings and negative reviews.
Regulatory challenges in binary trading
It is expected that there are a few bad eggs in any pool of websites that offer any brokerage services. The same problem applies in the binary options world. There are some trading platforms that operate unregulated, exposing the traders to great risk. Unfortunately, these unscrupulous brokers may often thrive on dishonest reviews, sparse information about their proprietors and different scams. Always ensure that you are trading through a platform that is recognized and regulated by a reputable financial institution.
Binary trading bears unique financial risks but it can still be done in a safe and manageable environment. On the bright side, having fixed risks and fixed rewards before entering each trade makes trading binary options a good way for