Trading the binary options can be quite exciting but it is very important to understand the advantages as well as disadvantages of this form of trading before you indulge in it. If you are thinking that binary options resemble gambling then you are highly incorrect as there is a major difference between the two. With binary options, a trader is able to do research and analysis before he enters into the market, whereas a gambler just relies on his luck to play his move. In binary options trading, there is absolutely no room for luck and it is a must for the trader to acquire necessary knowledge and skills before he succeeded in this form of trading. This article will give you a brief insight on some of the most common advantages and disadvantages of binary options trading.
• In this form of trading, the risk as well as the reward is known to the trader. Thus, the market movement has not got any role to play as there are only two possible outcomes, ie, you either win a fixed amount or lose a fixed amount.
• In majority of the cases, there are no fees like contracts involved in trading of these financial instruments and you can save lot of money.
• As the options involved in binary trading are much simpler to use, all you need to do is to just decide when there is the asset is going to climb or fall in value.
• As the ownership of the options does not lie with the trader, there are no concerns for liquidity for the trader. Due to this reason, brokers are also able to offer a great range of strike prices as well as expiration time which is quit beneficial for the trader.
• Trader can easily access multiple classes of assets in global markets at various times when they are open.
Following are some of the most common disadvantages of the binary options.
• The reward is usually less than the risk, as the losing trade cost trader much more than winning ones.
• This trading is often unregulated and then there are some issues with the discrepancy involved in the trade.
• As the traders do not have ownership rights for the asset, the money that is invested can not be exited or withdrawn until the time of expiration of trade.
All in all, with proper skill set, knowledge and information you can use this financial instrument to make some handsome money.
Source by Ash Rock Khan