Contributor Since 2013
Most individuals should recognise that no form of financial investment or trading is without its risks. Quite simply, if you want to make money then you have to be prepared to put your capital on the line. The trade off for this risk is that you stand to make a greater yield on your investment in the longer term. However while this belief has been true in the past, innovate more recent investment methods are starting to turn this ideal on its head.
Once of the newer and more speculative ways in which to make money from financial markets in recent years comes in the form of Binary Options. These contracts are dealt online and provide a straight 'all or nothing' speculation that is used to profit from price movements. The prices in question are those of financial assets and can include Stocks, Market Indices, Commodities and Currencies. Deals are made directly with the broker by use of a digital option. The broker will payout if you are able to call the predicted price movement correctly. If you can't then they will pocket your investment.
If this seems simple and much like wagering, then that is because it is. At no point is an investment ever made in the asset for any length of time. Instead 'the trade' is made over a short time periods which are normally intraday. These can last as little as one minute. However most contracts are placed to run for an hour or more. As no asset is invested in directly it is possible for the broker to offer these contracts on a wide range of different markets. This makes this form of trading ideal for private individuals who would ordinarily find difficult to access many of these markets.
So if this is a high risk activity then why have traders been keen to take up this form of trading? Well while there are risks involved when you try to a make money from binary options, what you do get is fixed risk. The risk as well as the return is defined up front when trading with digital options. You can never lose more than you stake on a contract. So you investment amount proves to be the limit of your liability. Furthermore you will also find that with many brokers you can even earn a rebate if you don't call the market correctly. This of course is not a way to make money, although it can help to soften the blow of a loss.
When this form of fixed odds trading is combined with a good risk strategy and a proper money management plan, it can actually prove to be a relatively lower risk trading method. Of course while you can make money from binary options you can also lose it as well. As with any form of investment or trading you must be careful and adhere to sensible trading rules. However as a quick and easy way in which to get into the world of financial trading, binary options can help to provide a good introduction to trading. Just be prepared to put in the work to become a successful binary options trader.