Gambling vs. Binary Options Trading
Binary Options have taken the financial world by storm and offering a system of e-trading that lets any investor participate in the financial markets with low investment amounts and limited risk.
Binary Options are transparent by means of Fixed Rate Options (FRO). When a trade is made the investor knows all details such as when trade will be close or the payout after the expiry of the particular trade. This is what sets binary options apart from every other form of option trading. However, F.R.O’s is a major risk management tool that is only available for investors trading binary options, but all the information about the option is disclosed from the beginning of the trade.
When you invest in an option you are making a ‘bet’ like a gambling. It just happens that what you’re betting on is which direction the underlying asset will move by the end of the expiry time. And that’s why Binary Options are a form of gambling. However, Binary Option Brokers don’t care to be associated with the gaming industry within financial regulations.
Now that we are being completely honest with ourselves about our investments or bets. So, let’s talk about how we can make some money with Binary Options trading. As a day trader you don’t care if an asset rises or falls. Just remember that, you do not own the asset, you are only betting on the future direction that it will move in. If the asset falls and you predicted it would it means that you’re a winner.
What I appreciate about binary options is the transparency. Because, when I put money down on a trade I know exactly what my payout will be. And in this sense, Binary Options are more similar to a sports bet or a table game than a traditional option investment. It is just because when I place a bet on any other form of gambling such as poker or blackjack or a sports bet, usually I know precisely what the payout will be if I have a winning ticket.
With traditional options the investor has no idea what the possible outcome of the investment will be, on the other hand a Binary Option tells you exactly what the payouts are.
Traditional Options are risky because if you purchase shares of a company or a commodity and the asset tanks, there will be two possible conditions, your money may be lost or tied up for a long period of time. It means that you’re investing blind, because the parameters of the trade are unrestricted and have no boundaries. Generally, the payoff for winning a Binary Option Trade is stated when the investment is made. Where the investment closes ‘In the Money’ at the expiration time, situations like this the trader will receive the value that the platform offered as a ROI. One-Touch Trading may provide payout rates over 600%, whilst standard Call/Put Trades have payout rates over 89%. There simply is no way of guaranteeing how any option will perform or its results, especially short term options such as 60 Second Trading.
Considering the nature of the Binary Option trading, one question always arises “Is the trading process an investing process or is it a gambling process?” There is only one answer for this question is that “it’s all about the attitude you possess.” Anyone who does not understand the limitations of the process and ventures into it with the idea of trading binary options as a get rich quick scheme will be disappointed. That is why you need to make use of money management strategies such as the Risk Management Rule, trading psychology etc. Binary Options should never be considered as a method to get rich quick. And the process is more than just predicting up or down.