Due to the increased popularity of binary options, and the existence of scams, there is a poor understanding by most people about how this type of trading works. It’s an unfortunate truth, in this type of market you might come across lies and false promises. Because of this, it’s best to start your trading career conservatively. Learn the basics, and keep note of the different methods to use while trading.
There is also the idea that trading Binary Options is a gamble. This assumption could not be further from the truth.
The truth is, success in trading binary options requires far more than luck. You need to know how assets move, and what is likely to affect the results. There are strategies you can use to manage risk, and make better- educated decisions about put and call options.
Here is a list of common misconceptions about binary options trading to help you sort out some of the myths of binary options.
FALSE: A Huge Amount of Money Is Needed to Begin
Obviously, some money is needed. But a lot is unnecessary. For most brokers, a $100 is all you need to start trading. Many traders mistakenly think that they need a lot of money to get started in binary options but you don’t. Be aware though, when you’re starting with a small account you need to be hyper-aware of minimizing risk.
FALSE : Binary Options Is Based On Luck
Profiting with binary options isn’t luck. It requires more than luck. You are making an assumption that a particular currency (for example) will close above or below a certain price, and by its nature you only choose an all-or-nothing option, but more than this, you need to know a little bit about how assets move, and what is likely to affect the outcome. While there is always the possibility of a last minute surprise or swing in price, there are strategies you can use to manage risk, and make educated decisions about your trades.
FALSE: Commissions for Binary Options Are High
Most brokers don’t charge commissions in the same way that many conventional traders are familiar with. Instead, binary options traders pay a premium to “buy” an options contract. That premium usually includes what is necessary for the broker to make money on the contract. If you are right about your call, you are paid. If you are wrong, with most reputable brokers, the only thing you’ve lost is the premium. The upside to this, is that you know exactly how much you stand to profit or lose before you enter the trade.
FALSE: You Have to Lose Money as You Learn to Trade
Instead of jumping in with your own money to trade, choose a broker that offers a practice (or demo) account first. While even veteran traders can expect to lose money at times, there is no reason to lose money due to your learning curve. Instead, use a practice account to learn the binary options trading platform you will be using. Only when you are comfortable with the process should you use an account that puts your money at risk.
FALSE: Binary Options Trading Success is Easy
While it’s true that binary options are fairly simple to trade once you get the hang of it, trading them isn’t as simple as it sounds. Recognizing the important factors affecting markets is something you have to spend time learning. Economic changes and political issues, among other things, can influence markets.
In order to find success, you need to realize that binary trading isn’t as simple as choosing Outcome A or Outcome B. You should have a sound basis for making your decisions, and at least some knowledge of how different events can influence the markets and encourage a trend.
In saying all this, don’t get discouraged! It’s very possible for anyone to learn and you’ll never know if you’ll succeed if you haven’t tried to do it. Just make the effort to get yourself somewhat knowledgeable, and educate yourself on the risks involved.