If you’re reading this it’s entirely likely that you’re interested in the trading world of Binary options. And there is good reason to feel that way. If managed well, and with proper knowledge, this can be a good way to earn money. But as with all forms of trading there are risks as well, and it’s very important to emphasize these and see the risk part of the risk vs rewards. There are rewards, to be sure. But you don’t want to fall for the idea that trading in this way is a quick way to make a lot of money and other things like that that a YouTube video may try to convince you of.
That’s the point of this post: to help you see some of the risks, that way you know more of the reality of what to expect. In no particular order, here we go:
There is Market Risk. This is similar to any other investing you may get involved with. Markets can, and very often do, go in different directions without any real warning. There are ways to predict some movements in the market, true, but just like the weatherman not everything can be predicted and pinpointed in a totally reliable method.
There is a fixed cap profit. With this type of investment your upside isn’t unlimited. The earnings are capped so you can only get so far with your investments. The opposite side of the coin, however, is that your losses are capped too.
This thing is precise. Extremely so. Not like a lot of other investment options the success (or failure) in binary options can be razor thin. Very much so. They’re measured by the slightest tick. Even a mere 0.0001 points can make the difference between being on the profit or loss side of an investment. Yeah, it’s that close. Very much something to keep in mind.
No ownership. Binary options are a wager on the direction of an underlying asset. So, traders aren’t investing in the ownership of any tangible asset. Some don’t mind the thought of that but others very much see that as a risk, and you may be among them, so knowing that is important.
Regulation is sparse. One of the big risks when trading in binary options is that the OTC markets aren’t regulated currently. So, while most of the trading platforms are as they appear there is a chance you could run into unscrupulous practices.
Illiquid. Binary options aren’t a “liquid” investment. They can’t be exercised at will and that means that traders have to wait until the options expiry date if he or she is to get any profits, or to see the losses either.
You should look and compare the best brokers to conduct your binary trades with. Sites such as www.binaryoptionsexpert.net provide essential advice and ideas in this area. Be sure to explore the various options before making a decision.
There is no way to fully eliminate risk associated with any form of trading. It’s just not possible to fully get rid of it. But you can, with planning and foresight, be in better shape and know more of what to expect. It can help tremendously in your confidence and actions, either for or against, if you know some of the big risks, so be sure to keep these in mind whether you get into binary options now or down the road.