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The attractions of binary options trading
Because you have just two possible outcomes to consider, binary options trading is considered simpler than many other kinds of financial trading. Typically, all you need to decide is in which direction you think the price of the underlying asset will move. Unlike with other forms of financial trading where your potential profit or loss is determined also by the size of a price movement, it doesn’t matter to a binary options trader how far prices have moved above or below the agreed strike price when the option expires. With binary options, a winning trade always produces the same payout.
Because of this, you have a clear picture of your risk-to-reward ratio before you enter a trade. This is in contrast to traditional options, where profits and losses can be limitless. With binary options, therefore, you don’t have to sit at your trading terminal, anxiously watching prices – once you have made your trade, you don’t need to check in until the contract has expired. You also don’t have to worry about applying complicated risk management tools like stop losses. Binary options are flexible, with brokers typically offering contracts for a wide variety of underlying assets – from foreign exchange or commodities to company shares or indices like the FTSE or S&P 500.
Contracts can also run for anything from 30 seconds to several months, depending on what your broker offers. This means you can tailor your trading to your own areas of expertise or trading style. If you’re an experienced trader in other markets, such as foreign exchange or shares, you can apply some of the skills you have already developed. Fundamental and technical analysis, for example, can both be used to help you form a view on future price movements.