Binary options trading is essentially the placing of a bet that a particular share will rise or fall. For example, an investor will place a £100 investment, stating that ABC Ltd shares will track above £50 by the end of the next period – which can be any time from a year to a few minutes. Thanks to digital systems the figures remain up-to-date in real time. If the share finishes the period above the £50 mark, the investor 'wins' and is credited with, for example, five hundred dollars. If the share ends below the fifty dollar mark – even if it is £49.99 – the investor loses his or her stake. There are many online investment sites that allow you sign up and start 'investing' straight away, with many promises of massive potential earnings and only tiny fine print mentioning that you could end up losing your entire stake, which can range from £5 to thousands of pounds.
Interested parties have investigated these sites and found the odds of 'winning' to be stacked in the site's favour. In order to break even you must be correct 55 percent of the time – in order to make a decent profit you must win considerably more.
This is not to say that you cannot make money with binary offerings, you can – especially if you have a good understanding of the stock market and can predict, with reasonable accuracy, when fluctuations will occur. However, the problem arises when someone not versed in the operations of the stock market stumble across references to binary offerings. Binary options trading seems to be an easy method of playing in the financial arena, and the principles are much simpler than other financial investment opportunities. For this reason people may well sink all their savings into binary trading, not realizing how easy it would be for them to guess wrong and lose all their money. One final drawback is that once you have placed your wager, you cannot withdraw your funds until the time period is up – even if the share is slowly sinking below your target! You simply have to wait and watch, hoping that the price will perk up and finish just on the right side for you.
If you are confident that you can handle a flutter on the stock exchange, make sure that you only invest money that you can afford to lose. Try to choose a site that does not completely wipe out your stake in the event of a loss, and do some research before signing up to any web-based trading sites. The one that offers the best returns may not be the one to go with – remember the old maxim: 'if it seems too good to be true, it probably is!' It is possible for a skilled trader to make good returns, especially if they keep their knowledge about share movements up-to-the-minute. Day traders – those who try to complete transactions in one day – may consider binary options trading amongst other investment offerings.
- Binary offerings are essentially speculating on market fluctuations
- You can get reasonably good returns, but you need to have a strategy or system that helps you pick right about 75 percent of the time
- A loss usually means your entire stake is wiped out, although some traders offer a percentage of the stake back.