Perhaps one of the leading factors that make binary options trading a good financial option is its inherent transparency. Investors in the trade will know exactly what it is that they are getting into — there is no ‘open position’ that will leave traders exposed, nor is there any stop-losses for them to manage.
There are only two essential factors that matter most when an investor decides to venture into binary options trading: knowing exactly how much to invest in a given position, and finding out whether an asset’s price is likely to rise or fall within a certain period of time.
Binary options traders are also well-informed about the possible risks in each trade they’ll be making, thanks to pre-calculated risk levels that are usually accessible in the platforms being used for trading.
These pre-calculated risk levels are designed to help investors decide how much it is exactly that they are willing to invest, and for how long they would want their investment to last.
While there is no perfect formula to accurately predict asset prices in binary options, the tools being made available to traders — paired with the constant watch for factors that may affect asset pricing — should significantly lessen the risks involved in each trade being made.
Spread betting is another financial option closely similar to binary options trading. It is, however, a lot more complicated.
In spread betting, the traders’ profits are largely dependent on the so-called ‘pips’. Traders have to purchase 1 pip right above the market rate, and sell 1 pip right below the current rate. Following this rule, if the so-called pips increase by 10, the trader’s profit is actually at 8 pips — purchasing 1 pip right above the current price, and 1 pip below the “future” price.
If, for example, a trader believes that the Euro is about to strengthen its position against the USD, and he bets $20 per pip — with the difference being a total of 10 pips — the profit would be at $200.
The process in this type of betting is complicated in such a way that more things and factors need to be calculated and put into consideration during every step of the way.
Binary options trading, on the other hand, is as simple as it can get. Pips are irrelevant, and traders who accurately predict asset prices’ movements automatically win regardless of any other factors.
Traders are in control of how much they want to invest, when they want to invest, and for how long they are willing to invest.