Advantages of trading binary options

The are several key advantages of purchasing binary options as opposed to other forms of trading or  investment which goes some way to explaining its rise in popularity over the past five years. This starts with its simplicity in comparison to other, more complex forms of investment but also includes factors such as the ability to easily control risk, increased flexibility for traders with limited timetables and, of course, the potential profits to be made.

One of the simplest way to trade currency and stock markets

In terms of the obvious simplicity of binary options trading, this should not be understated. For both new and highly experienced traders, binary options offer a straightforward interpretation of the market; simply higher or lower. The trader can apply of their analytical powers in to the two straightforward decisions of the length of time to allow the options expiry and whether this will be higher or lower than the strike price at the moment of purchase. Traders will, of course need to also decide on how much to invest but this is removed from the complex and potential hazards of trading on margin as many new forex traders experience. The rules for purchasing binary options are far easier than this with the initial investment being the full investment amount. The value of this investment does not rise or fall in the same way that stock or forex trades might and binary options traders therefore know exactly how much they are set to lose or gain before the trade has even been placed.

Binary options can provide better risk management for new traders

An additional feature of binary options trading which makes it more attractive than forex and stock trading is the ability to manage risk much easier. As we have already seen, binary options provide a predetermined level of risk before the options are purchased. This is typically between 85-100% of the initial investment and does not change regardless of the degree to which price moves either side or the purchasing price. Stop losses are therefore not required in binary options trading and along with this comes an instant removal of the risk of adjusting stop losses of failing trades as is very common for inexperienced forex and stock traders alike. Furthermore, sudden market volatility will not affect the level of losses in the way that a price spike can often cause forex traders to incur large degrees of slippage in the execution price. For many who prefer risk as quantified, binary options offers this as a distinct advantage over other forms of investment.

Binary options offer flexibility outside market hours

For traders who are not able to trade during market hours, binary options offer a great way to trade during the quieter trading sessions and even at weekends. The reason that binary options are popular outside of market hours is twofold. The first reason is because traders do not pay spreads on purchases of binary options which, in slow moving markets, are unattractive and risky. It is also worth noting that spreads for overnight markets are also far wider on currency pairs than during active market hours. The second reason is that binary options traders only require the price to move one point higher than the strike price in order to be profitable, whilst currency and stock traders rely on price moving by a larger degree in order to be equally profitable. This clearly favours the use of binary options in quieter trading times and for trades which may only move one or two ticks higher or lower. Binary options therefore provide an advantage for those seeking flexible trading and who may not be able to trade during normal market hours