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Why Binaries are Becoming Popular

You have to pick a directionAn easy investing strategy involves looking at companies, thinking about where they will be ten years in the future, and if they feel like they will still be profitable at that point, they are a good long term buy and hold. This, however, is not how short term trading works. For the short term, the only thing that matters is movement, especially when you look at binary options. If you think that a stock will move ten cents in the next 15 minutes, a short lived trade could make you a lot of money if you risk enough.

This is why binary options are catching on so quickly. They present an opportunity to give yourself a safety net without risking anything extra. In fact, you can still make big profits and risk much less due to the high rates of return.

You can only use them with major and popular stocks, though, like Apple, Facebook, and Microsoft. The good news, though, is that traverse a single market. You can trade stocks and indices from a binary broker, as well as currency pairs that you would normally only find in the Forex market, and commodities. It is a great place to consolidate your trading if you have varied interests.

Here’s how it works.

The safety net occurs because the amount of movement has no bearing on your profits in most cases. If you guess that the stock will go up, it can go up a half penny or a million bucks and your profits will be the same. So, if your goal of ten cents isn’t hit, you are still getting something in your pocket with this method of trading.

At the same time, you don’t need to risk as much to see profits. The profit rate is independent of the amount of change in price. You get the same regardless when you are correct. Usually binary options brokers payout around 78 percent for a correct trade. To make $78, you only need to risk $100. If the stock moved the ten cents that you were hoping for, you would need to own 780 shares of it to see the same profit amount, and that does not take stockbroker fees into account. And the cost would be completely dependent on the price of the stock. If it was $1, you would still have to risk $780, or almost eight times what you had to front in the binary market.

But because a $1 stock would never be offered in the binary market, this isn’t the case for the stocks we are talking about. If you are interested in trading Apple, for example, a stock that is currently over $100, you would have to multiply that $780 by over $100. It ends up being more than three-quarters of a million dollars that you would have to risk for that same profit off of that tiny bit of movement. It simply is not worth it.

In this regard, binaries bring short term trading to the average person. You can risk far less, and if you have a talent for it, you can meet your goals with a lot less cash, and a lot quicker than any other type of trading simply because you can dictate smaller timeframes per trade. They’re certainly not for all people, but for those that do want to add a little extra dimension to their portfolios, or want to begin a career as a short term trader without a huge investment, it’s a good resource to have on your side. Also, it gives you cheaper access to expensive assets, like Apple’s stock, since you can trade smaller amounts and still see big profits.

Risk Disclaimer