March 10, 2017

Advantages Of Binaries

There are many benefits of using this form of investment for both the retail investor and also to the market makers or brokers.

RISK MANAGEMENT:

Risk management is actually very simple when trading binaries. The amount that you chose to trade, is the amount that you risk losing. This immediately simplifies the risk for both the trader and the broker, making it fundamentally different to most other forms of investment.

The trade size, and payout are both known before the option is even open, which differs from other investments, where neither figure is known. Nothing presents a risk and reward as simply as the fixed payout option does.

ADMINISTRATION:

With the certainty of risk and reward, it provides a solid foundation for brokers to operate, and manage their position overall. They can protect themselves even further by creating processes, such as using a liquidity provider, or by hedging their own positions.

The accurate levels of risk, makes the expensive cost of clearing houses completely unnecessary. However, this low barrier to entry can be a double-edged sword, and it means that brokers have been able to set up and operate with little or no regulatory oversite, attracting dubious operators.

LEVERGE:

Leverage is not normally available with binary trading, benefiting the broker.it means that all trades must be traded in full before they can be open, meaning that no trader can default on a trade.

Trading with leverage means that they are effectively trading on credit, and should anything go wrong, there is a definite risk that the broker will not be paid.

Lack of leverage can also benefit traders, although many will argue that it also restricts their ability to profit. Many retail investors can lose large sums unintentionally by using leverage.

TRADER CHOICE:

The standard fixed payout option has many different layers, that allow it to be used in a range of ways. Binaries can be used in a huge variety of ways, from ladder options, to boundary trades, or more advanced ‘nesting’ of options.

If a trader wishes to take a position on an underlying asset, binary trades offer the greatest level of flexibility, even providing a mechanism to speculate on a market that is remaining flat, or to take a view of the underlying asset.

Some benefits have been lost in the debate, or simply been misinformed. These factors should not taint the vehicle itself, which actually remains a sound, high risk / high return financial product.

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