Compared to other trading products such as Forex or CFDs, binary options are very easy to understand for beginners. In this form of trading, it is important to correctly predict whether the price of an underlying will rise or fall within a specified time period. Unlike other financial products, it doesn’t matter how much the price changes. The trader should specify exactly when to place his trade only if the post time price is higher or lower than the opening price. No complicated calculations, how much the price should change so that the trade is closed regardless of cost, no additional order functions like stop loss, trailing stop or take profit orders. hop or top This is simple There is no compulsion to pay additional amount.
But why is there always a warning against binary options? We got to the bottom of this question and took a closer look at the different binary options.
Binary options are a form of betting
While other financial products, such as forex, CFDs, or even equities, trade profit or loss in proportion to the price change, there is no separate quantity for binary options. Either you win or you lose. In both cases, the amount is not determined by the price, but is given by the broker and is already settled upon delivery of the trade. The same is true of ordinary sports bets (or bets on other events). The bookie sets a quota and the betting participant can bet on a team. If this team wins, the participant wins a predetermined amount. If the team loses, the mission is lost. The same is true of binary options, except it is not about teams, but about rising or falling prices.
Due to their high similarity with speculative trading, binary options carry the same risk as these. Again, many factors are unforgiving. If the bet is lost, then the whole bet is gone. The addictive factor should not be underestimated either in betting or in binary options.
Binary Options Are Not the Right Investment for Every Trader
Binary options are very interesting and trading is much more enjoyable for most investors than investing in stocks or other, more predictable forms of investment, because binary options usually have very short maturities, so it is rarely seen live. Can go, whether the trade is won or lost. Although the entertainment factor should not play a major role in a serious investment plan, there is no denying that binary options have a certain appeal. This makes them interesting to investors, but no less dangerous.
Since in the case of a losing trade the entire job is directly lost, no money should be invested with binary options, which are actually still planned for other purposes. Only capital whose losses the trader can easily recover is suitable for trading. Clients who do not have such funds or whose losses are still being recouped should under no circumstances trade in binary options as there is a risk of such losses that it can become a serious burden. This is what binary options warn on brokers’ websites: “It threatens to lose the entire deposit.” Clients should be aware of this before deciding to trade in binary options.
high gain – high loss
Binary options attract many traders not only for their simple structure, but also for their high leverage. With only one trade, the user can still win almost 90% of his investment in some brokers and in just a few seconds. Hardly any other investment has such a high profit potential.
However, the barriers to solo trading should not be underestimated. Although the above mentioned high profits are indeed possible here, no reasonable trader puts all his capital on a single trade. If it is lost, and the chances of it never being, even with very good analysis, all the money is gone. Long term trading strategy involves many trades, some of which are won and some are lost. In case of losing trades, as a rule, the entire stake for this trade is gone. Of course, these binary options losses put into perspective the higher profits of other trades, because what counts in a single trade is not important, but what comes out at the end of the day, week or month. These can still be high gains, but can also be high losses.
Small ad promises high profits with little effort
Unfortunately, not all sellers are honest and advertising has been known to make most products sound better than they actually are. Therefore, when advertising for binary options attention is called. It often highlights the high profits that are actually possible with a lot of expertise and luck, but mentions the potential pitfalls only marginally, if at all.
Many newbies have already lost money because of this type of binary options without even being aware of the real risk of this investment. Anyone who seriously thinks about trading binary options and has the necessary free capital to do so should not be blinded by such promises, but must be realistic about trading binary options, developing good risk management and determine the extent of damages. That’s not much. Only with a realistic picture of binary options can you be successful in the long term.
Consumer protection also sees binary options as important
Consumer protection authorities have been warning about binary options for many years. In his opinion, these are too much a luck factor and do not represent a serious investment. While it can be argued that there are traders who make a living on binary options, on the other hand, there are also professionals who make a living playing poker. Here, as in binary options, a detailed analysis, stochastic knowledge and a very good understanding of the game are necessary, so that the high luck factor is not fatal. Traders should therefore take binary options warnings seriously and only with these actions, if they are aware of the risk, have adequately dealt with the trade and can prevent the money spent.
Only trade with reputable sellers!
An important note that unfortunately still some newbies consider: Watch carefully which online brokers you entrust your money to! Not all brokers are reputable and just because they promise high profits, you should not act prematurely. With binary options, there are many opportunities for good trades every day and every minute, so you won’t miss a chance if you don’t register with a promising bidder right away. Take a closer look at the offer and see if it is really a serious company. Good brokers do not deny the ubiquitous dangers of this investment and have integrated a highly visible binary options warning on their website. Also the experiences of other dealers can be helpful. In our broker reviews we have gathered a lot of information about different providers.
Scammers often sit abroad
A broker who intends to defraud his clients usually chooses his seat in a manner that makes it difficult to appeal and is bound only by very loose guidelines. Therefore, many questionable providers are found, for example, in the Caribbean island states, as they offer a license, but the conditions and controls are much lower than in other EU countries. Even in case of a dispute such so-called “off-shore brokers” usually have good cards, because by their headquarters abroad, they are difficult to reach, so that clients here usually have little chance. Although not all brokers based in remote countries are automatically suspect, there are plenty of good providers out there too. However, for beginners, it is safer to choose a broker with EU regulation. Good brokers make no secret of where their headquarters are located and by which authority they are regulated. Therefore, pay attention to the license on the broker’s website.
Bonus promotions often promise lots of money
Many clients often forget to read the binary options warning when they hear a broker offer them extra money when they sign up. Of course, we are all delighted when we discover a generous bonus offer and in works, where apparently often hundreds of euros per customer are given, you have to quickly log in and deposit with this provider Will be tempted
Most of the bonus promotions currently available in the industry are not really questionable. Traders make a deposit and then receive additional funds on their trading account. However, this is not a “gift”, as such binary options bonuses usually do not come without conditions. Most bonuses have to be traded multiple times, and many binary options traders have already lost money, neither the deposit nor the bonus. And there is a danger, which is often overlooked: even if the bonus is on the trading account, it may not be paid for a long time. In order to meet the payout terms, traders take a high risk on which they can lose their entire deposit. Thus, profit from the bonus at the broker’s end, as it may be time and again the trader fulfills the conditions and pays the bonus, but many bonuses pay out despite only one and never exit .
allow for losses from the outset
Binary options losses are there to trade for beginners and pros. Since it is very difficult to predict prices for short periods, there is a lot of volatility in trading and even a trader who can place the majority of his trades with a positive expectation will not make a profit every day. Is . Therefore, traders should expect losses. In extreme cases, even a good trader can lose his entire balance. Here’s what you need to know when getting started in binary options trading. Nothing else for the money you deposit with the broker. Maybe it would be beneficial. Then you can pay for it. Only from this point the money can be reallocated to other things, but then it is not available for trading. You may even lose your entire deposit. But then you do not get into financial difficulties, because the money was intended specifically for binary options trading.
Conclusion: For binary options, caution is advised
As we have seen, binary options pose risks. Hence, they are not suitable for investors who are looking for a safe investment opportunity. Although high returns are possible, they are also associated with several risks. Binary options warnings that reputable brokers are required by legal provisions to post on their sites beforehand clearly state that this is a very risky investment and may lose the entire deposit. This cannot be denied, although there are some traders who trade binary options professionally. But even these traders are at risk as binary options are a very volatile form of trading. Therefore, only the money should be invested even if total loss can be easily faced. Also, before registering with a broker, you must read its terms and conditions carefully. Here you can find out which rules apply for this provider and what to look out for. When looking for a suitable provider, our broker comparison can help.