What are the differences between conventional trading and Binary Options?
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I am one of those who during the day, while the connection allows me of course, I watch videos on the Youtube platform of the various topics that interest me, some to learn and others to entertain me, where there is something that has caught my attention and it is about the ads that the same platform places on what is trading.
This has surprised me because before the pandemic I did not see very often ads about trading, but nowadays I saw them daily, especially about a business model in trading, an investment derivative called "Binary Options", which led me to investigate in more detail what this was and why there are so many ads about it.
What are Binary Options?
According to what I could investigate and my personal interpretation, Binary Options are a very peculiar type of investment where the main difference is that the opening of a contract or operation has a time limit, which we can choose at will among the options offered by the Broker. Another thing is the amount, which is the amount of money that we will place in an operation and that depending on the broker will return us a percentage of our investment, which commonly can go from 65% to even 95% of this.
These operations can last seconds, minutes and even hours, but we will not be interested in what price we buy the asset, since in binary options, we must choose a side between Up and Down, if at the time we choose our prediction is fulfilled, no matter what price is the same, we will win the operation regardless of the price at which it was entered and in which it ended.
Of course this model of investment in trading can bring many advantages, but also disadvantages and big risks compared to the traditional market and I will try to highlight the most striking differences of both models.
Differences between Binary Options and the traditional market
Binary: I already mentioned at the beginning the peculiarity of the binary options that had to do with the expiration time of each operation.
Traditional market: The traditional market does not have an expiration time, a position can be open as long as the investor wishes in order to achieve its objective.
Binaries: In binaries the broker pays you a percentage that commonly goes from 65% to 95% of the amount established by the investor. Clearly if you win it is a very good profit, but if you lose it quickly we can incur in losses burning the account.
Traditional market: The investment in traditional markets is basically to buy an asset cheap and sell it expensive or vice versa, the profits will be given depending on the broker and the leverage it offers, so it will depend directly on the investor to risk much or little capital.
Binaries: In binaries there is no Stop Loss and although in some way we can control our losses, in my opinion I see this investment model much more risky than the traditional one.
Traditional market: Certainly the traditional market is less risky in a certain way than binaries, in this if we can reduce our losses depending on the capital that we are willing to lose in the period of time that we choose, so this makes me lean as an investor who preferably want to protect their capital in all operations and investment.
Conclusions
I always seek to learn many things by myself by researching and reading, I was very curious about binary options and now I am well informed about this investment model in the financial markets, of course, I stay with what is the traditional one that in my opinion is much less risky than the previous one but it does not mean that in the future I could operate this investment model.
Until next time and happy investing.
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