The Genuine Simplicity of Binary Options
All trading appears simple enough to new traders, although even the least experienced ones will realize or quickly come to realize that deciding how long they should remain in a trade is not going to be all that easy.
Once one places their very first trade, they start wondering how long they should stay in it, and deciding this properly is indeed a big challenge for those less experienced. Invariably, we will start second guessing ourselves and often succumb to emotions like greed and fear which will have us making bad decisions.
People may exit trades too early or stay in them too long as they seek to impose their will upon markets, not realizing that markets move independent of any desires they may have or their profit and loss in a trade.
We learn from these mistakes, or hopefully we do, but there is a lot to learn and we not only need to come up with good strategies that make money over time, we also need the discipline to execute them properly. Not sticking with one’s trading plan is a major challenge for traders and there are many who have killed it with a demo but wilt under the pressure of real money trading.
This is another thing to learn, to be able to have enough discipline to trade your plan, and we tend to underestimate the challenge here and don’t realize that there is a learning phase with this as well as coming up with profitable trading ideas.
Binary options eliminate the need to make decisions while the trade is going on, and if you’re not having to decide anything, there is nothing to screw up at this point.
This is a huge benefit and much more of one than newer traders generally realize, because they haven’t gone through the trials and tribulations of managing trades enough to realize how much better it is for them at their point in development not to have to do any of this.
All we need to do with binary options trading is to decide to enter a trade, place the trade, and that’s it, we’re done with it, completely. It does not get any simpler than this, and while coming up with profitable trading ideas with binary options is by no means a simple matter, if that’s all we need to do, we have simplified the process greatly.
We can trade the simplest of binary option trades, basic put and call options, and just stick with this type of trade forever if we want to. As we get more experienced and skilled, we can go beyond this to different types of options such as touch and range ones, and even put together more sophisticated strategies such as trading spreads but we don’t have to do any of this.
Anything that can reduce the learning gap when learning to trade is a big benefit, and going from knowing nothing to being able to compete well enough takes quite a bit of time and effort. The more there is to learn, the more skills we will need to master, and the more difficult something is, the less likely we are to succeed.
Binary options attract a lot of traders who are new to trading, as well as many traders who may have struggled with trading other things and are looking to try something else, and the greater simplicity of binary options trading makes it easier for both new and more experienced traders to grasp.
Binary Options Offer Easy Access
One of the real barriers of trading is the amount of capital that you need to trade certain securities. If you’re looking to trade stocks for instance, you need a good amount of money to put up in order to be able to trade with enough size to make the cost of trading reasonable. The same is true with trading futures, where you need enough money to buy the minimum size and go big enough to justify the commissions.
Binary options offer at least greater access, and in many cases, much easier access. If you live in the United States and are trading binary options, through Nadex, their contract sizes are $100, so to be safe you’re going to need to have $10,000 to put up which will allow you to stay within the recommended 1% trade size.
If a trader wanted to be more aggressive they may wish to start out with less, going with 2% instead and therefore only needing $5,000 to get started, they might be OK, although this is not a good idea if you don’t know enough about what you are doing yet. It’s not a good idea to ever trade real money and especially substantial amounts when you don’t know what you are doing, and risking $100 per trade when you don’t isn’t a real good idea unless you can blow off this $5,000-$10,000 without worrying about it.
One of the benefits of Nadex is their very low fees though, so you need a smaller edge to be profitable with this, but you still need one, a meaningful one. Brokers in other countries offer smaller trade sizes, as little as $1 a contract, and by going smaller you can really limit your risk and not have the bar so high as far as what level of confidence is needed when switching from play money to real money.
The very idea that someone could trade anything with real money with as little as a couple hundred dollars and be reasonably well funded is an entirely new concept to trading though, and things like binary options, forex trading, and contracts for difference have made this a reality.
Binary options give you access to being able to trade quite a number of different things, things that people may have not been able to trade before. While we can gain access to these markets through other means, including standard options, they are much more complicated to say the least and binary options allow much less sophisticated traders to seek to make profits from these other markets.
Other Benefits of Binary Options
There are three main types of markets, up markets, down markets, and flat markets. Investors for instance tend to only take advantage of up markets, while traders tend to look to capitalize on both up and down markets by betting one way or the other according to trends.
Binary options not only allow us to benefit when something is moving up and down, it also lets us take advantage of flat markets as well, where options trades can be placed which pay off if the price of something stays within a pre-defined range over the allotted time of the option.
While nothing really runs that flat and traders can capitalize on the smallest of movements by way of leverage, managing leverage properly does take some real skill as there is greater risk involved that needs to be managed well lest we get ourselves in all sorts of trouble.
With binary options, we need to ask ourselves where a market is going, and going up, down, or staying within a range are all tradeable scenarios. We of course need to be right about this often enough, but we at least are never in a position where we can say that the market is too dead or too volatile, as deadness or excessive volatility is not a concern here.
Predictability is though, and this is our stock in trade when we trade binary options, and even more so than it is with other forms of trading. We do not want to be guessing here and we do need probability on our side, which manifests itself in a predictable enough way for us to take advantage of these moves reliably enough.
By simplifying trades to the extent that all we really need to decide is whether we should take a trade or not, this does make trading a lot easier. We also don’t need to watch our trades like we do with other types of trading, all others actually, and those with limited time can place their trades at once and even place very short-term trades and then just walk away and see the results at their convenience.
This is an even bigger benefit than it may appear and not having the time to monitor trades is a big impediment to casual traders. You can’t day trade if you’re not there for instance, and those who can only monitor trades periodically are limited to longer term trading over a period of days to weeks.
Binary options traders also don’t have to worry about getting nasty surprises, as the amount that they are subject to losing in a trade is defined as the cost of the option and no more. While this benefit does tend to be overstated by proponents, as there are other ways to manage losses, it doesn’t get any better managed than an absolute loss maximum like this.
Overall, binary options have a lot going for them, and while they don’t take all the work out of it, and there are some real skills that we will have to develop prior to making money consistently from them, we are at least hitting the ground running.