3 Major Myths About Binary Options Debunked

I hate to sound like a conspiracy theorist but it seems that the traditional financial market industry is out on a mission to discredit binary options. Binary options is a trading instrument that allows traders to trade a simple binary Yes/No proposition on a market event. If the market event turns out in line with your trade, you’ll gain a predetermined payout, you’ll lose the money you placed on the trade if the outcome of the market event goes against your trade.

The critics who are out to discredit binary options often try to achieve their aim by trying to instill fear in the hearts of binary options traders. They also employ distortions of the truth and outright falsehood to discourage traders from exploring binary options. This article seeks to debunk three of the commonest myths making the rounds about binary options.

Binary Options are Risky

The foremost myth that the critics of binary options often peddle around the financial markets is that binary options are “risky”.  When potential traders hear those fear-inducing words, they tend to avoid trading binary options because of the mythical “riskiness” of the trading instrument.

However, the fact remains that all forms of trading carry an element of risk. It doesn’t matter that you are trading binary options, traditional options, stocks, forex, commodities, or bonds – you’ll automatically assume an element of risk in all of your trades. In fact, you’ll still court some “risk” even if you decide to avoid trading and investment risk and you choose to stuff money inside your mattress or bury cash in your garden.

Binary options carry an element of risk but they are not spectacularly riskier than other type of trading vehicles such as stocks and forex. Under normal trading circumstances, low-risk trades will attract low returns, medium-risk trades attract medium returns, and high-risk trades attract high returns. Hence, you can always tweak   your binary option trades in line with the risk-reward dichotomy that make you comfortable.

You’ll lose all your money trading binary options

The second myth that critics often peddle to discourage traders from exploring the wealth of possibilities in binary options is that you could’ lose all you money through binary options.

The fact however is that it is technically much more easier to lose all of your money trading stocks, forex, or other assets than it is to lose all your money through binary options. Stock traders often trade stocks with margin calls, which is essentially borrowing money to place a trade. If the trade turns against them, they’ll need to recoup the losses and repay the money they borrowed in the leverage trade.

You simply can’t lose all of your money if you learn the rules on how to trade binary options . To start with, binary options allows you to consciously decide how much you’ll place into each trade. Before you place the trade, you’ll know how much you stand to gain if the trade turns out as you expected. The best part is that the other assets in your portfolio are safe because you can’t lose more than the money you placed on a trade if the said trade goes against you.

Binary option is similar to ga1mbling

The third lie that the traditional traders often peddle to discredit binary options is that binary options is not much different from gambling. Gambling is simply staking money to play a game of chance in the hopes of winning more money. Gambling however is not synonymous with taking risks in speculation and it not related to investing.

Trading binary options is not a game because you are placing your trade on real world events in the financial markets. To trade binary options successfully, you’ll need to understand how the underlying asset of your binary option works. For instance, if you want to trade binary option on stocks, you’ll need to know how to use fundamental and technical analysis to gauge the future performance of the said stock.

In addition, the broker on whose platform your place your binary option trades cannot influence the outcome of events in the capital market. The economy, market dynamics, government policy, and news are some of the facts that move the assets that people trade with binary options. In contrast, gambling establishments often set up their gambling tables in a way that ensure that the ‘house always wins”.