Binary options are touted by brokers as a serious investment product, allowing you to earn high returns in a short period of time. On the other hand, consumer advocates are concerned about this speculative option, as they see it primarily as a risky game with the potential to trade it, and ultimately only the broker wins. Also, the fact that binary options are not only available to online brokers, but now also to bookmakers, doesn’t put trading in a positive light. We take the critics’ concerns in more detail, and wish to provide our readers with an objective analysis of the opportunities and risks of binary options.
Are Binary Options Gambling?
Binary options consist of simple financial bets. Traders have two possible events to choose from. After the set time has elapsed, the underlying price may rise or fall. In one of these cases, he sets an amount of his own choosing. If this event actually occurs, traders will earn a profit if the price rises as predicted. On the other hand, if the event does not occur and the price does not behave the way the trader originally assumed, the stake in the bet is lost. This simple design makes binary options particularly popular with newcomers. They are quick to learn. On the other hand, deals are often in criticism. Because, by definition, this is actually a bet.
Just because binary options bets doesn’t mean you can trade them profitably. Most people know that gambling is a game of chance, and there is no benefit in the long run. However, this is not the definition of betting. Although binary options involve a high degree of happiness, they are not purely a game of chance as the odds of winning can be influenced by target analysis and a good understanding of the market. Whether or not a trader can be successful in the long run depends on whether or not they are successful in creating binary options. Make bets with positive expectations. If the average expected profit per bet is higher than the bet, it is a bet with positive expectations. Whoever makes a lot of such bets can reap long-term profits.
variance problem
As we have seen, binary options trading is all about making good decisions and trading in a way that has a high chance of winning the trade.
For price analysis, several methods are available, from relatively simple to very complex. But in order to actually trade, one price analysis must give a strong command and a positive result for the trader to suffer this often big losses, even she loses the entire trading capital. How is this possible? If traders had chosen a more probable outcome each time, they should actually make a profit. The difference arises here.
The so-called expected value is the average value. If a trader places a trade with an expected value of 58%, they have a positive expected value. Therefore, traders will make average profits if they choose this trade. However, for individual transactions there are still two possible outcomes. 58% represent average only. If many trades are placed on this expectation, 58% of them will win over the long run. On the other hand, 42% will also be lost. The more transactions, the more accurate the result. This means that price analysis is always designed for the long term. Everything about individual transactions is possible. Also, this kind of trades can result in consecutive losses, and under certain circumstances, can put the trader’s entire deposit at risk. For example, if you have 10 trades of this type, you cannot assume that 5.8 will win based on expected value. Anything can happen on a small scale. But in the long run, when thousands of transactions have been made, the results are very close to the expected values. So, if a trader has completed 100,000 trades in one day and the average expected value is 58%, we can assume that the number of won trades is close to 58,000.
The possibilities for price analysis are limited
In order to analyze in detail the price of the underlying traded and to be able to make such good trades, users can use a variety of methods and tools. Course analysis can be learned quickly, but there are many intricate subtleties, so you need to keep training because even an experienced trader can learn something constantly, as you can further improve your results and develop new methods regularly.
Many brokers offer free training or video courses for beginners to learn course analysis.
Price analysis is undoubtedly one of the most important tools in binary options trading and is critical to long-term successful performance, but it should not be overestimated. Some newcomers expect to gain newly learned analytical skills and almost all trades, and some advertisements for binary options suggest this to their clients, but there are many unpredictable factors in the course process, and this is only a short time even with optimal analysis. Only very imprecise predictions are possible. Traders who can get around 55-56% of their trades with the help of technical analysis are already very good, and can benefit most brokers if they stick to the necessary risk management. However, this dealer has to live with trades losing 40% or more.
Without good risk management, binary options are a gamble
The difference between binary options is high because it is an “all or nothing” bet where you either make a high profit or lose your entire bet. Your luck with individual trades is still very high, as even good price analysis can very vaguely predict whether a trade will win or lose.
Due to differences, almost anything can happen in the short term. If you’re lucky, you can win a lot more trades than the odds calculator, and traders will make big profits. In this example, we are talking about positive variance. On the other hand, negative variance can occur and traders lose significantly more trades than the average expected value. Only when seeing a very large number of trades does the result match the expected value, and good traders can actually show positive results.
The big problem with it is that many traders don’t even trade a large number because negative variance occurs and they lose everything. To prevent this from happening, traders who seriously pursue binary options trading and want to avoid gambling should practice good risk management. This means that only a very small fraction of the total capital is traded. This causes the trader to lose too much in the event of a negative divergence to continue trading. In the event of a loss, the amount of your stake will be reduced accordingly so that fluctuations do not significantly affect your total equity. Of course, a high degree of discipline is required to take more risks without diverging from planned risk management, as profits do not rise as quickly as a result of much smaller stakes. Many good traders get in the way of success because sooner or later negative variance occurs and high stakes lead to loss of capital.
Many brokers offer free educational materialsv
A well-done target price analysis is critical to long-term success. Beginners often have free educational materials, so you can learn many aspects of course analysis directly from a binary options broker. It is recommended that you deal with this intensively before starting the actual transaction. (A) is well aware by the increased winning chances. Many brokers also offer free demo accounts. Here, users can know about the game money, so there is no risk of trading binary options and newly learned strategies. Implement and deepen the analysis method. So you don’t need your own investment to understand binary options financial betting and make sure the trades match your ideas.
A free demo account gives you an initial experience, and now anyone who wants to trade with real money always has to pay only a small amount. Since the risk of total loss is always given, he can easily do without. Although it can be limited by proper risk management, even the best traders cannot completely avoid it.
Even good traders keep high risk
Binary options are considered a very modern commercial product and are very popular. However, critics sometimes complain about the broker’s unmanageable course design and high risk of loss. Despite all the analytical options, binary options remain a highly speculative trading variant. It relies on luck, at least in the short term as well as in the medium term. Even experienced traders with rich expertise cannot make steady profits, but often suffer huge losses. Good risk management, risk to A reduce loss of the entire deposit, but there is no perfect security. Therefore, all newcomers must know before making their first deposit. Although high profit margins are possible, deposits can be lost as well.
The accusation that binary options are pure gambling cannot be confirmed. This is because, as the success of some trading experts has shown, there are opportunities to influence your chances. However, it is true that binary options are financial bets in which a bet is placed and a predetermined payout is paid out on a positive outcome. The goal is to only place bets with positive expectations. This will pay off in the long run.
However, with binary options, the risks should not be ignored because even professional traders put their capital through large binary options. Since it is a speculative investment with extreme variance, there is a possibility of continuing high losses. Even total losses, which many traders have already experienced, are possible. Therefore, you always have money to be used, there can be an acceptable loss without limits, never beyond your own means, even if it comes to life with tempting promises, it is credited to the broker.
Before registering and making a deposit with a binary options broker, potential customers should read the terms and conditions carefully and check their integrity. Only brokers who trade fairly according to the rules can successfully trade binary options.
