Binary options trading is a type of investment in which a trader bets on the price movement of an asset within a specific time. If the investor’s prediction is correct, they earn more money in addition to their investment. If the prediction is wrong, they lose money.
These have become one of the most popular types of trading due to their low capital requirement, simplified process, and substantial potential returns. Despite its popularity, many myths and misconceptions surround binary trading. Let’s examine some of these myths and reveal the facts about binary options trading.
Myth 1: It Is a Scam
This myth was started by investors who were unable to profit from binary options trading or were unable to withdraw their profits. However, this phenomenon is not limited to binary options trading. In many instances in all investment markets, traders are manipulated, misled, or hindered from withdrawing their profits.
Brokers who use reputable brokers such as IQCent do not have such experiences. Reputable brokers are always upfront about their trading conditions and withdrawal requirements. Local and international regulatory bodies also regulate them. These bodies force the regulated brokers to follow strict rules and regulations, store clients’ deposits separately from broker funds, and be transparent in their dealings. On the other hand, reputable brokers go the extra mile to offer educational materials for traders to understand what binary options trading entails and to improve their skills.
You will be fine if you use a reputable binary options trading broker with local or international regulatory licenses.
Myth 2: These Options Are Just Betting
Many people are under the assumption that binary options are just like placing a regular bet with a bookie. They get this assumption due to the way binary options trading works. In binary options, a trader has to answer yes or no to whether an asset price will be above a strike price at an expiration time.
However, they transcend beyond just answering yes and no. Most options brokers also allow you to exit the trade before expiration. The strike prices are determined by market conditions and not by the broker.
When you observe it critically, you will see that binary options trading is no different from other trading types like stock trading. You invest your funds in stock trading, hoping the marketing conditions will favor you. It is the same principle that applies to binary options trading.
Myth 3: It Is Only for Experienced Traders
Due to the high-profit potential and risk of a financial downturn, many people wrongly believe that binary options trading is only for professional traders who have been trading for years. That belief is unfounded as many online trading platforms, such as iqcent.com, allow anyone to try trading binary options.
These brokers offer helpful resources such as online articles, explainers, and video tutorials so new traders get up to speed on how binary options work. They also offer demo accounts with simulated market conditions so traders can practice with virtual funds before investing real money.
Furthermore, their simple structure makes binary options easier to understand than other financial trading markets. As such, even less experienced traders can understand risks and rewards at any given time during a trade.
Myth 4: Binary Options Are Illegal
This is not true. Binary options are legal in many countries, including the United States. However, regulatory authorities often restrict how a broker may offer binary options trading services. For instance, countries such as the United States require brokers to register with the Commodity Futures Trading Commission (CFTC) before they can legally offer binary options trading to residents in the US. Other countries, such as the UK and Australia, have regulatory requirements that brokers must comply with before offering binary options trading.
On the other hand, many regulated brokers are not member brokers of these regulatory bodies. These brokers may offer binary option trading services to traders whose countries do not have such regulations.
The only illegality in binary options trading is to commit fraud or to trade with obviously duplicitous binary options providers.
Myth 5: Trading Binary Options Requires A Lot Of Capital
The minimum opening balance is just $20. This low deposit requirement makes it easier for people to trade binary options with little capital.
Furthermore, most binary options are priced between $0 and $100. You can choose to invest little or much in each trade depending on the size of your capital and risk appetite.
Tips for Beginners
Binary options trading can be an exciting and potentially lucrative venture, but for beginners, it can also be a complex and risky endeavor. Here are some tips to help you get started on the right track:
- Educate Yourself: Before diving into binary trading, take the time to understand the underlying concepts, terminologies, and strategies involved. Familiarize yourself with different types of options, charts, and indicators. Numerous online resources, books, and courses can provide valuable insights.
- Choose a Reliable Broker: Selecting a reputable binary options broker is crucial. Look for brokers regulated by recognized authorities, as they are more likely to adhere to industry standards and offer transparent conditions. Consider factors such as platform reliability, customer support, available assets, and payout rates.
- Start with a Demo Account: Many brokers offer demo accounts, allowing beginners to practice trading without risking real money. Utilize this opportunity to familiarize yourself with the platform, test different strategies, and gain confidence before investing your hard-earned funds.
- Develop a Plan: A well-defined trading plan is essential for success. Determine your financial goals, risk tolerance, and preferred style. Create a strategy that incorporates proper money management techniques and stick to it. Emotions can be detrimental to trading, so having a plan will help you stay disciplined.
- Start Small and Diversify: As a beginner, it’s advisable to start with small investments. This approach will allow you to gain experience and learn from your mistakes without incurring significant losses. Additionally, diversify your trades across different assets and market conditions to reduce risk.
- Stay Informed: Keep yourself updated with relevant financial news, economic indicators, and market trends. Stay informed about the assets you are trading to make informed decisions. Use reputable financial news sources and consider joining online communities or forums to learn from experienced traders.
- Practice Patience and Discipline: Binary options requires patience and discipline. Avoid impulsive decisions based on emotions or short-term market fluctuations. Stick to your plan and exercise patience, as successful trading takes time and practice.
Binary trading options are a great way for experienced and new traders to make money. However, you should separate the myths from the facts and apply the risk management rules. You can profit from binary options with sound knowledge, practical strategies, and awareness of potential risks.