What Keeps You Up At Night About Trading Binary Options?



If you are going to trade with binary options accept the fact that you will have days where money is lost. This is par for the course. This is why you should only invest discretionary funds.

Fear can prevent you from moving closer to your ultimate financial goals. It is important to undertand that even the most successful traders deal with fear and doubt. As a trader you must learn to manage fear.

Realize that you will have fear. It is simply part of the investment process. This means that you must accept it.

One of the big advantages of trading with binary options is that you can easily control your risk. Some trading platforms will let you bid with as little as $5 dollars. This goes a long way towards helping you get a handle on fear as you learn the ropes.

A good way to manage risk is to make sure you never place the majority of your capital in a single trade, to earn a large payout. Yes, this is very tempting, but it should be avoided at all costs. Even the trader can make drastic mistakes when too much money is placed on a call or put. Make a habit of investing no more than 5% to 10% of your total capital. You will glad that you took this advice in the long run.

Learn to hedge your bids. This involves taking out an opposite position in order to limit the loss that can occur. Another big advantage of binary options is that they are very easy to hedge, and this can be an excellent way to limit exposure drastically.

It may also be helpful to put yourself in situations with people who are also trading and can relate to what you are experiencing. Online trading forums are a good resource for this.

Asking for help.
If you are in a situation where you feel totally out of control you may need to ask for help. This help may take the form of an experience broker or a thearapist. (Remember, any investment carries risks. Seek the proper advice before investing money).

Binary Options vs. Traditional Stock Market Trading

A binary option pays a fixed amount or nothing. These type of options, are also referred to as all-or-nothing options, since it is a type of option where the payoff is all or nothing. The return is therefore fixed and it comes to no surprise that such options are also known as: FRO’s-Fixed Return Options, Digital Options is another common term.

Trading on binary option platforms can be done with little to no knowledge of the stock market. An investor will only need to choose whether the price of some asset (underlying asset) will be higher (in the case of a call option) or lower (in the case of a put option) at the option’s expiration. Binary options are offered for a time period of 60 minutes or less.

The main difference between a regular vanilla option (traditional stock trading) and a digital option is largely based on how much the contract can potentially lose or gain. Digital options (binary options) are often referred to as FRO fixed rate options since the contract will have predetermined percentage of fixed rate of return.

Traditional vanilla options are much riskier since the potential gains can have no ‘ceiling’.  Regular options options have a payoff that is based on the price of the underlying asset. This can vary dramatically in return on your investment. But with a binary option you only need to consider the direction of the asset price (up or down) in a specific measurement of time (minutes, days, weeks, etc.). The important difference here is that you don’t have to take magnitude into consideration.

With binary options trading the payoff is fixed and pre-determined so therefore the potential risk and reward is known from the outset. Whereas with traditional options there are no outlined parameters so the possible loss or gain is not known (and can be dramatic).

The option will settle the contract regardless of how much the asset price is ‘in the money’ at expiration. Therefore even if the contract is only successful by one tick the contract still pays out at the fixed level.

Binary options allow you to focus on the most stimulating aspects of trading, the challenge and fun of forecasting market direction, rather than on the acquiring more risky ability to estimate the market trends. (Remember, any investment carries risks. Seek the proper advice before investing money).