The Risks of Binary Options

Published:16 July 2016 Updated:4 January 2024

Financial trading, like any sphere of speculation and private enterprise, involves a certain level of risk. You can make a bad investment in real estate or an illiquid commodity and suffer losses, but for the correct conduct of any business there are recommendations that help to avoid such losses. Binary trading as a constituent part of stock trading also has certain conditions that increase the efficiency of trading and reduce the risks. Today we will consider the risks binary optionsbut not in the context of calculating the risks in trading operations on the exchange market, but in the form of basic mistakes that traders may encounter when trading binary options.

 

Risk #1 – Improper choice of broker

This is a fairly common mistake for beginner traders. Because of inexperience a market participant believes that it does not matter which broker trade, the main thing is to have a good intuition to guess the movements of quotations or have a super-strategy. And this is the main misconception and risk for a market participant. Intuition in the financial market is necessary, but it does not work steadily and does not bring good results, and there are no superstrategies that could cope with the misconduct of a fraudulent broker at all. As a result, the trader gets the loss of the deposit, disappointment and bitter residue for the rest of his life. To avoid encountering such a risk of binary options when choosing a broker, consider such indicators:

  • License of the body that regulates the financial market
  • The degree of technical potential of the broker’s trading terminal
  • Trading conditions offered by the company
  • List of auxiliary services for binary options trading
  • The rate of monetization of profits and the list of services that are available from the applicant for cooperation
  • Feedback from traders who have had experience with this broker

This simple list will avoid acquaintance with scammers and save you from the main risk of binary options – loss of funds due to fraudulent actions.

In terms of a recommendation, one might suggest Binomowhich fully meets the parameters of a reliable and professional broker:

  • License
  • Own technically advanced terminal
  • Minimum trading conditions – deposit from 10 USD, volume of transactions from 1 USD
  • Analytics, training, customer support at a professional level
  • Withdraw profit in 24 hours using any well-known payment service
  • Excellent reputation in the market among traders

 

Risk #2 – Trading without training

The arrogance of beginners is sometimes astonishing – relying only on luck and intuition trader starts trading relying on the result, while treating binary options as a game. This approach to binary trading does not work, remember it and pass it on to the others! Only knowledge in this area will help you reach your goal. The more so, that learning how to trade is not difficult and does not take much time or money. For example, at the broker’s website Binomo has an excellent systematic collection of educational services:

  • Interactive Binary Options Trading Guide
  • Video lessons
  • Knowledge Base
  • Webinars

Once you have completed all the degrees, you will receive a complete set of basic information on binary options trading and you will perform all the operations on the market using the most innovative approaches to trading and receive stable profits as a result.

 

Risk #3 – Trading on an unworkable strategy

This type of risk of binary options is associated with a large number of trading strategiesThe first thing to do is to use the trading systems presented on the Internet without prior study and evaluation of their effectiveness. Opening the description of any strategy on the Internet, we are immediately confronted with the fact that the authors promise a tremendous success to a trader who uses it, a beginner takes such a system and it turns out that it only leads to losses. There is only one recommendation for this – before you open at least one real contract using the strategy – test it by yourself! Evaluate its performance, learn about its principles of use, determine the effectiveness. There are several ways to do this, the most effective is testing on demo platform. The broker we chose as the optimal company for the example Binomo, offers an excellent simulator with no restrictions on technical tools, the amount of virtual funds and time of use.

With the Binomo demo platform you will be able to determine how effective your chosen trading system is and will not trust funds to unknown strategy developers and simple advertising.

 

Risk #4 – Greed of the trader

Maximalism and striving for wealth are probably in the human DNA. This is especially true for beginners on the binary market: “earn it all at once” is the motto of a novice trader. For this purpose a market participant starts ignoring the rules money management: overestimates the value of transactions, draws up contracts for the entire volume of the deposit and, of course, sooner or later (sooner rather) loses all of his investments. So, how to avoid it? Do not chase the fast profit, correctly calculate trading risks of binary options, estimate the market situation! Thus, you will develop in yourself certain rules of discipline from which you will never deviate. Only in this way you will reach the heights in binary trading.

This is not the whole list of novice traders’ mistakes and binary options risks faced by a market participant. But this list allows you to get rid of the basic mistakes and leads to a positive result on the financial market.

In conclusion, it is worth saying that the main risk of binary options is the risk of not becoming financially independent. By giving up binary options trading on the financial market you lose your chance for a good life!

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