Perhaps the most popular mechanism of trading the financial markets, binary options is the newest trend in the market. Simplicity, transparency and instant gratification are the features that give the binary options the advantages that place them ahead of other financial market tools. Here one might want to know what binary options’ trading is? Simply explained, binary options are a fixed odd bet that is placed on the price movement of the underlying securities. The payoff in case of binary options is generally fixed and predetermined and is subject to payment at the time of expiry, if the option ends “in the money”. In simple terms, the traders buying binary options have to anticipate the price movement of the underlying security in the market being traded. If their anticipation is correct, even by a single pip, they stand to get the predetermined fixed amount as payoff.
In recent times, we see that there are many online advertisements that attract new traders to invest and earn big money, by trading binary options. No doubt the concept of binary options has revolutionized the way financial trading is carried on and it has provided grounds to make good money by investing small sums. Nevertheless, this alone cannot be touted as the single reason to promote binary options and lure investors that have lost their hard-earned money in share trading or other financial markets.
Binary options’ in its might is a trading activity that provides an opportunity to invest and make money by correct anticipation of the price movement. This is not just an instrument, which can be used to get-rich-quickly. It needs analysis, research and experience to be able to read the price trends of the underlying securities.
Therefore, the question that arises in the mind of many is that whether binary options a gambling tool or a trading tool. In fact, here the thing that makes the difference and is the key to the answer to the posed question is the ‘attitude’. It is the way, in which binary options are considered and accordingly what actions and decisions are taken. A person who approaches binary options’ trading as a get-rich-quick scheme is sure to find out sooner or later that if one can make money fast with binary options, he may lose more than that and even more quickly. The reason being, that such people keep hoping to make it big in all their subsequent trades, putting aside all strategies and trade management theories.
On the other hand, a professional that utilizes money management strategies weighing the risks of non-performance, would not put all his money in one big position. He would analyze and use proven strategies to put his money. Unlike a gambler, he would not assess each trade to be a 50/50 bet, but study the odds and put in money when they seem to be in his favor. Another important aspect that a rational trader would look at is the leverage provided by the trade. He is not running after one big win, but aims to make small wins that add up to his kitty. A real professional would never allow a single trade to wipe out his entire portfolio as a gambler. He treats the financial market with respect and is aware that despite all the analysis, there are chances that the market would go against him.
At the end, it is the difference in the attitude, which marks the difference between taking binary options as gambling or a form of trading.