Binary options are one of the fastest growing investment types. Over the last few years, binary options for day traders have become more and more popular.
Was that a smart move? Can binary options present a legitimate alternative to CTFs and conventional assets for day traders? In this article, Binary options for day traders, we will shed light on these question.
In this article, you will learn:
With this knowledge, you will immediately be able to judge whether binary options are a legitimate alternative to your current type of investing. Learn more in our article Binary options for day traders here:
Binary options are a new way of trading financial markets. Binary options are revolutionary different from conventional assets for a number of reasons:
As you can see from this list, binary options are fundamentally different from other investment types. Consequently, they offer new possibilities and new chances no other asset type can offer. Let’s look at these possibilities and how day traders can use them to their advantage.
With their unique characteristic, binary options present a similarly unique set of advantages and disadvantages. Day traders can use the advantages to make their trading more profitable and trade unique new strategies. Learn more about binary options for day traders now:
These four differences between binary options and conventional assets make binary options a worthwhile alternative for some traders. To understand which traders can profit from using binary options, let’s now look at two examples.
Whether you should use binary options for your day trading depends on two factors: your personality and your preferred strategy. Since your strategy says a lot about your personality, let’s focus on this part and look at strategies that are ideal for binary options.
If you like the straddle, binary options can make your life a whole lot easier. With a traditional straddle strategy, traders would simultaneously invest in one asset that profits from rising prices and one asset that would profit from falling prices. They would set a stop loss for both assets and hope that the option in the direction of the market movement direction would make them more money than they would lose on the option in the other direction.
If the market moves strongly in one direction, this strategy can turn a profit. One asset will run far into the money while the other loses less than you win. With conventional assets, there are, however, two problems with this strategy:
Binary options can solve both of these problems. Firstly, when you trade binary options, there is no spread and no fee, which means that you can trade even the smallest movements without having to worry about the spread becoming too large.
Secondly, binary options offer a tool called boundary options. With boundary options, your broker defines two target prices, one above the current market price and one below the current price, with both target prices equally far away from the current market price. If the market reaches either target price, you win your option.
With this setup, you can replace the two assets used in conventional straddle strategies with only one asset. While you might lose this option, this worst-case scenario with binary options is no different from the best-case scenario with conventional assets. With conventional assets, however, you might lose two assets. Consequently, your risk is twice as high.
For day traders who like the straddle strategy, binary options present more than a legitimate alternative to conventional assets – binary options are the superior trading style for straddle strategy traders.
Those traders who want to trade the shortest of time frames with conventional assets suffer from the problem we alluded to earlier: conventional assets use a spread system, and this spread can render trading short term trading impossible.
To understand this problem, let’s look at an example. Assume that an asset is currently trading at $100 and that you want to invest in a movement that might last about 15 minutes. Such a short movement will be relatively small, maybe $0.05 in the right direction. If your broker’s spread is $0.02 for this asset, which is a realistic assumption, trading this movement makes little sense. Even if your prediction was perfect, you would waste half of the movement only to cover the spread, which would make your trading unprofitable.
With binary options, on the other hand, there is no spread. Consequently, no movement is too small for you to trade.
To put traders in the perfect position to take advantage of short-term movements, binary options brokers developed an option type called 60 seconds options. With 60 seconds options, traders can predict whether the market will rise or fall over the next 30, 60, 120, or 300 seconds.
The unique thing about 60 seconds options is that it is unimportant how far the market will rise or fall. Even if the market moves in the right direction by the smallest possible increment, you will win your option and get the full predefined payout. This payout is around 70 to 80 percent, which is much higher than you could get with a CFD or any other conventional asset.
Additionally, the ability to trade shorter time frames allows you to place more trades in the same period of time. With a winning strategy, more trades equal more money, which is why 60 seconds options can be a great tool to increase your profits.
For traders of ultra-short time frames, binary options might present a preferable trading style that enables them to trade market environment and movements that would be unprofitable with conventional assets.
Binary options are a unique form investing that provides unique advantages. For some traders, they present a legitimate alternative to classic day trading tools such as CFDs and stocks. Binary options are especially attractive for traders that want to trade ultra-short time frames, small movements, and complex strategies such as the straddle strategy.
If you trade one of these strategies, you might want to give binary options a try. Many brokers offer demo accounts that allow you to test their service and binary options with play money instead of real money, thereby putting you in the perfect position to try binary options risk-free. There is little reason for day traders to reject such an offer. If you like binary options – great. If not – you have not lost a Cent – you can only win.
Binary options are so different from everything else that it is difficult to make a general recommendation whether everyone should trade with them or not. Some traders will love them; some traders will hate them. We suggest you find out for yourself.