Binary options trading has become increasingly popular recently because of several factors. First and foremost, the ease of binary trading as contrasted to mainstream investment vehicles makes it a favorite for investment novices as well as more experienced investment pros. Binary trading is wide in its scope, as it offers access to global assets including international stocks, commodities, Forex, and indices, but with a much narrower approach to traditional trading.
Binary trading is essentially quite simple. Binary trading offers two options when buying contracts: call or put. Investors choose “call” if they predict that the underlying asset’s price will be higher in a short period of time (an hour ahead for example) or “put” if they think it will be lower. It really is that basic. This is why beginning investors have been so amenable to this type of evolving trading strategy. The complex world of financial instruments can cause an investor to spend years trying to figure out the right trading strategy. Stock/commodity charting, trend-following, systematic trading methods – these are often confounding for the average investor.
This ability for an investor to have a pre-determined profit or loss structure allows them precise knowledge of what they may earn or lose, even before the trade occurs. For beginning investors (and experienced ones as well) this provides to some degree, a sense of security. For most, risk management has become especially important particularly after the last two vicious bear market which evaporated so much investor wealth.
Many sophisticated investors are also becoming fans of binary options as it allows them to hedge a specific investment or an entire portfolio. Further, the short-term expiration of these contracts allows these investors flexibility to hedge an investment if they are worried about a near-term move/news event/announcement that could affect their asset. So it is definitely not just a trading strategy for beginners.
Another facet of binary trading that is propelling its success is the ability to potentially profit quickly when compared to traditional investments. From 2000-2012 the stock market was essentially flat, frustrating many traditional stock and bond investors. Waiting years for an asset to come back from a drawdown or never come back has made investors over the last 13 years look at quicker investing options. Binary trading does give an investor the potential to make a quick return on their investment and not cause the aggravation so many investors have felt looking day in day out, month in month out, year in year out, for their investment to regain its footing or even squeeze out a profit.
The low barrier to entry in binary trading is another feature that has so many investors actively looking to begin. Many brokers such as Empire Option, Banc de Binary, and Stockpair allow investors to open up with as little as a few hundred dollars. Further, many of these brokers will even allow investors to fund their account with a credit card. As many investors have been burned through the last few bear markets, gaining access to a new trading style with such ease makes binary trading so attractive for new and seasoned investors alike.
In conclusion, it is easy to see why binary trading has become so popular so quickly. Quantifiable risk to reward, low barriers to entry, and a simple to understand trading methodology are just a few of the reasons investors of all types are entering the binary trading world. Investors can choose from brokers all over the world, and a wide variety of web-enabled, downloaded, or mobile app platforms, giving them global access to the world’s financial markets. It is clear that binary trading is here to stay.