With more money and goods flowing in the world’s economy than ever before, it’s fair to say that world trading will continue to grow, even in the face of temporary political and financial instability. Combined with constant technological progress, global population growth and the human nature to develop and seek new markets, this becomes especially true regarding online trading, where it’s easy to see why binary options trading has established itself as one of the most appealing financial instruments of recent time.
While sharing some similarities with forex trading, binary options possess their own unique features and advantages. These attract aspiring traders from various levels of experience, as they are simple, dynamic and easy to understand, yet present an innovative approach to markets trading and are also potentially highly profitable for both operators and end-users.
Like with forex, binary options traders profit, or if unfortunate lose, from the price movements of stocks, currencies, indices and commodities. However, the main difference between the two is that in options trading investors do not purchase shares or a particular asset (to later sell for a profit and vice-versa), but rather invest in their prognosis on whether the value of, say gold for example, will increase or decrease over a predefined time period. If the prediction is right, traders immediately realize a profit, but more importantly they always know exactly when and how much they stand to win or lose. This innovative way of trading and investing brings a couple of important advantages to options trading, which requires practically no previous trading experience or deep understanding of the trading world, unlike forex, where substantial financial knowledge is essential. This, on its own, makes binary options very attractive to potential customers and operators looking to expand their portfolio.
As mentioned, the main advantage of binary options compared to forex lies in the fact that investors do not attach themselves to or buy the particular asset – they merely invest in its value fluctuations. Let’s take a simple example to illustrate. VW is the leading car manufacturer in Europe – the continent’s largest industry. The corporation is also set to take the global lead from Toyota, as it’s the parent company of highly profitable and expanding manufacturers as Audi, Lamborghini, Bentley, Skoda, not to mention VW itself. So imagine you have acquired a considerable amount of VW shares, which look nicely set to bring a profit due to the company growing.
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However, the USA’s Environmental Protection Agency only a couple of weeks ago announced that VW has manipulated results of harmful emissions tests, affecting millions of cars globally, while the Department of Justice informed it would be launching a criminal investigation against the brand. The company’s shares, along with its reputation, started falling with double-digit percentages. Every day. You can reasonably guess that VW’s Forex investors have seen better days. However this situation is actually great for binary options traders – they have all the signals in the world that the company will sustain heavy losses before starting the long recovery, so why not invest in this prognosis, supported by industry experts and reputable media. Binary options trading is characterized by an extremely simple decision-making process, since there are only two clearly predefined outcomes.
They have a number of other attractive features as well. Unlike Forex, where you need significant capital to start trading, most binary options operators offer real-money accounts with minimum starting deposits, ranging from $10 to $250 and the actual trades can be executed with as little as $10 in investment. Furthermore with binary options, traders always know exactly how much they could win or lose when the option expires – it’s not the same in Forex, where in certain unfortunate scenarios losses could be virtually unlimited and ruin investors. Options trading’s simplicity is further enhanced by the fact that all transactions are processed through secure, encrypted connections and users do not need to install additional software, just open and fund their accounts.
Leading providers of this financial instrument have also developed a number of variations to it to suit the trading style of each customer. For example an option could have an expiration period from one minute to a month; it could be a touch/no-touch option (traders predict if an asset’s price will reach or not a predetermined value) or a boundary option (traders predict if an asset’s price will stay within a defined value range).
Having all of this in mind, it’s easy to see why Binary options popularity is growing to the point, where it could become more popular than Forex trading. In an industry worth billions of dollars every day, binary options present a fresh addition for operators and an exciting challenge for traders. For operators they are a chance to tap into a growing market, while diversifying their portfolio, as Forex trading has over-saturated the market in recent years. And for traders, Binary options are a simple, fun and potentially highly-profitable way to enter the exciting world of trading, as they require no insight or previous trading background, just a little interest in what’s going on in today’s economy – something we all actually need today.