Binary Options Trading FAQ
Hello everyone, Legit Binary Options Review is here with the Binary Options Trading FAQ. Though you obviously know what FAQ mean we are saying it again, it’s Frequently Asked Questions.
Let’s know the Binary Options Trading FAQ for better understanding on binary options trading and on the binary options market.
What is Binary Option?
“Binary Option” is a very simple prediction or betting type trade which the only outcome is ‘Binary’ and always resulting as Yes or No. If you win or your prediction is right you will get a fixed amount which includes profits, but if you lose or your prediction is not right then you will lose your total investment. In one sentence “Binary Option” is a form of financial option with fixed returns.
How Stock Trade Works?
You can trade stock through binary option by following below steps:
1. Select the stock what you want to trade.
2. Set the expiry time of your trade.
3. Enter your trade size or the investment what you want to invest.
4. Predict the stock price, if it will go up or down and execute your trade by placing a put or call trade.
The stock trading process is same in all broker. In some broker, you can see few more complexity layers, but in stock trading Up/Down option trade type is the most popular among the traders.
What is Call and Put Option?
Call and Put are the term to buy and sell options. If you think the asset price will rise than the underlying price, you can buy a Call option. But if the asset price expects to fall, you can buy a Put option.
Call and Put shows as the buttons in a trading platform and different broker names them differently like Call/Put, Buy/Sell etc. Most of the broker uses the Call/Put term in their trading platform. Every broker makes it pretty much clear that a trader is opening his/her trade in which direction by the Call or Put option.
Is Binary Option a Scam?
A common question because people feel insecure when they want to invest on something. Binary option is a tool of financial investment, so it can’t be a scam. But yes there are dishonest, unsafe brokers, signal providers and trading robots in the market.
The point is Binary Option itself is not a scam but a broker can be dishonest and a scam. For these type of dishonest operators, binary option financial investment tool suffers. For that reason, financial regulatory authorities from all over the world started to regulate and license the operators and they fine the dishonest operators or closing them to clean up this industry.
You can avoid the scams by checking the below facts in an operator:
1. Promise huge return in the promotion – It’s a clear warning for you. Binary options trading is a financial tool with high risk and high reward as a return. You can’t be wealthy overnight by trading binary options. The operators who claim such thing is not trustworthy.
2. Know about the brokers – Some binary options trading operators especially binary options auto traders and robots are partners with different brokers, so in many cases trades have no idea with what broker they are opening their accounts. Before start trading, a trader should know about the broker whether it licensed or not.
3. Beware about Cold Calls – Cold Calls can be a dangerous thing for the trades and regulated brokers are not allowing Cold Calls. Also, legit brokers are not offering this. The unregulated brokers who are interested in getting the initial deposit amount from the traders offer Cold Calls. You should avoid these type of broker.
4. Check brokers terms and conditions – I suggest you check the terms and conditions of a broker especially before accepting any kind of bonuses. Some brokers are looking for an amount of initial deposit until the traders make trades in a high volume. The first deposit amount is only trader’s money, the legit and licensed broker would not claim this money before any trade is placed by the traders. Some brokers also offer an option for canceling the bonus in case it does not suit for them.
5. Do not depend on anyone for your trading – Trade yourself and do not let the account manager trade behalf of you. In this case, you can see a conflict of interest because the account managers always encourage trades to trade in a large size and to take big risks. You should be careful about that.
6. Check license and regulation of the brokers – I think this is the most important part to determine if a broker is a scam or legit. If a broker is licensed and regulated by the financial regulatory authorities, only then you should trade with that broker. But if a broker is not licensed and regulated, simply avoid them.
Which are the Best Trading Strategies for Trading?
The strategies of binary options trading are different from each other. Legit Binary Options Review has a section for Binary Options Strategies, and from there you can learn about different binary options trading strategies and can experiment with them. Combining with asset price research and charts many traders use technical analysis. For all trading to ensure the risk management, money management is very important. Different traders suits with different trading strategies.
Actually, there are multiple best strategies, not a single one. What trading strategy suits you depends on you need, investment aim and on the risk management.
Is Binary Option Trading a Gambling?
It entirely depends on the habit of traders. Without any research and strategy based on your luck if you invest to win or lose then it’s more like gambling. But if you don’t depend on your luck and trade with your skill and with your result of market research to avoid the lose then Binary Option is a fair trade to place on.
You should make a trade based on the expected asset value and profit, not on your luck which is gambling. I think you understand that this question’s answer completely depends on the trader’s behavior.
What are the Advantages of Binary Options Trading?
Today’s world is filled with many financial investment tools and now people can easily engage with these financial markets through the advanced technology like the Internet-connected computer, laptop or mobile device from any place of the world.
There is little bit confusion among the people in what financial market they should invest. Forex has got the attention because of the legit activities of Forex brokers and they were able to believe people that forex is the easy way to make money. But forex market has few peculiarities and for these many traders already have been seen the wrong end of the forex market.
This is the point where binary option comes to save the traders with many unique advantages over any other financial trading instruments.
Check out the below advantages of the binary option.
• Low Financial Risk
If you traded forex before you obviously know about the huge risk of forex market because the blown off the forex market is very easy. In the other online trading except for binary options, trades outcome affects by many parameters and traders have to battle with them. You have to consider too many things for forex trading like margin, leverage, price re-quotes, slippages and news events too which are able to make a negative impact on your trading. That is why forex is riskier than binary options because there are no such things in binary options trading.
There are no leverage, slippages and price re-quotes in binary options trading. So your trade will not affect by any additional facts or tools. This is the main reason which makes binary option trading a low financial risk trading. Some binary options brokers return an amount of the asset purchases even though traders lose their trades.
• Trading Flexibility
You can trade currency and commodities in binary options without leverages, slippages and price re-quotes as well as can trade stocks and indices. You will not have such trading flexibility in any other online trading. Binary options are like an all in one shop where you can trade all the major assets in one place.
• Binary Options Trading Simplicity
The direction is the base parameter of binary options trading. On what specific direction the asset price will end the traders are predicting that. Moreover, you have the freedom to set your own trade expiry time. This gives the opportunity to a badly started trade end up well. There is no such thing in the other financial market. So there is much less risk in binary options trading than the other markets.
• Great Control on Trading
In binary options trading, you will have better control on your trading. As the example, you want to buy an asset, you already know what you in advance what you can gain and if you lose the trade what you will lose you also know that. It’s decent and clear to the traders what is not happening in other trading markets.
In this case, if you look at the forex market you will see that if you want to set a pending order to buy a news event with high impact, there is no guarantee that your trade will place at the entry value or at the exit point to stop loss your losing trade can be closed out.
• Binary Options Trading has Higher Payouts
You will have a higher payout for your trades comparing the other trading market. Most of the legit and licensed trading brokers offer a payout of 70% to 90%. Without jeopardizing your account this payout can be achievable. In the other financial trading market, you can expect that kind of payout if you are able to disregard the money management rules and can invest a huge amount on trading.
• Trading Accessibility
You need to have a huge amount of capital if you want to trade in the forex market with higher volatility. In the time of high volatility, Gold a commodity asset of forex market may have the volatility of up to 10,000 pips means that requires an investment of $10,000. For this reason, the trading access is limited in such type of market for the traders.
Binary options entry requirement is so much lower than the other financial market, you can trade with a low investment as $10 with some legit binary options trading broker.
What are the Disadvantages of Binary Options Trading?
• For Sure-Banker Trades Reduced Trading Odds
If an asset trading success rate is very high then the payout reduced drastically for that specific binary options trade. It is also true that some assets trades offers a payout of 85% for every trade. But this type of payout is only possible in long term trading and this type of trading is more unpredictable than the short term trading.
• Lacking Trading Tools
Some binary options broker do not provide useful trading tools like technical analysis tools and chart to their customers. Expert binary options traders always looking for that type of tools and new traders are not so fortunate like them. Though the scenario has changed quickly now. Renowned binary options brokers have all the tools and who have not they are adopting these tools according to their customer’s needs.
• Risk Management Limitation
Financial tools like forex allow the traders to trade in min-lot and in micro-lot which are small trading size, while some binary options trading broker only set a floor for trading and by depositing a minimum amount traders can trade. In this case, traders can lose more capital when trading binary options.
As the example, by depositing $200 in forex market you can trade forex instruments in micro-lot, but in some binary options broker if you deposit the same amount you may have to invest $50 to be eligible to trade an asset and if you lose four trade your account will blow up.
Don’t worry, there is some binary options broker who allows you to deposit as low as $10 and you can trade by investing only $1.
• Losing Trades Cost
How much losing trades cost you? It’s a very important thing for options trading. Binary options trading risk reward ratio favors the red side means losing trades. If you win in a trade, your payout can be 70%-90% depending on your asset and investment. In the same case if you lose this trade your loss will be 85%. But it is great that if you execute ten trade in a day, you only lose four trades out of ten trades in a bad day.
• Corrections of Trade
You can correct or stop a losing a trade anytime in the forex market to minimize your loss and to open a profitable new trade, you can do that in forex market if the repeat analysis tools reveal that by mistake the first trade was made. It is not so much available in the binary options brokers except few unique broker. In most of the binary options broker, the payout amount of the reverse trade is sealed and you cannot cover the losing trades.
Some unique binary options broker has an option to sell your losing trade before the expiry time and you don’t need any analytic tools help here, just sell the losing trade by clicking the sell option button. Sometimes this losing trade can be profitable during the time of sale.
We hope you found the answers to most common questions about binary options trading. If you have more queries, you can contact us through our contact page or through our chat system. Thanks for staying with us.