Getting into binary options trading can be exciting and potentially lucrative, but it also comes with a unique set of challenges. Don’t get caught up in the adrenaline rush just because it has almost no learning curve and it can be done from anywhere, like that favorite bean bag chair. There’s more to binary trading than many people think. It’s always a good idea to start with a broker, at least until the initial newness wears off. Here are 5 things every investor should know about binary options trading.
1. It Has Similarities to Gambling
Some conservative investors and critics liken binary options to gambling. It’s actually very similar to a game of roulette. With quick maturities and a winner takes all–or usually nothing–mentality, there’s not very much skill required when compared to other forms of trading. Of course, skill is still necessary, which is why there are binary brokers. However, if someone has issues with gambling or thinks binary trading is a get rich quick scheme, it’s probably not the best investment.
2. There are No Long Term Strategies
Binary options mature within a day, and some within just minutes. This isn’t like the stock market where investors can watch a stock for days, weeks or even months. Investors have to get in and get out as quickly as possible. Basically, an investor thinks a certain stock will sell for a certain price at a certain time. If it doesn’t, everything is lost.
3. The Right Broker is Worth It
Binary brokers know the system and can help a newbie learn the ropes. A lot of people don’t use brokers because of the transaction fees. Binary options are “over the counter” which means that if no brokers are used, there are no fees. However, the fees of a broker quickly pays for itself. An investor stands a better chance of making money with one–at least in the beginning.
4. The Regulations aren’t Very Strict
When comparing binary options to NASDAQ or other bigger markets, the regulations simply aren’t as strict. Of course, there are rules in place and they’re enforced. However, it’s still a bigger gamble than other avenues. When choosing a broker, make sure they’re properly certified and don’t have any hidden additional fees.
5. It’s Easy to Lose
Just like in Vegas, the odds are stacked in the house’s (or company’s) favor. Otherwise, why would the company accept an investment if there was a chance they’d lose? Think from their perspective. Binary options can be great fun and at times a solid investment. However, it’s very easy for someone to get in over their head. Tread carefully and practice caution when getting into this trade.