Most of us have probably heard about binary options. Naturally, there is tons of information online however first we need to define binary option. It is a type of option in which payoff can be constructed to have only two possible outcomes – a certain amount of compensation or nothing at all. Contrary to other financial products the holder of the option does not have choice to buy or sell the underlying asset. The investor gets a predetermined amount of money if his guess about something specific happens.
It sounds more like gambling than investing as long as there are only two possible outcomes. Some of us might say that trading binary options is the same as going to the casino. In some cases it will be true because some binary options traders are gamblers and trust only to luck of their guesses. Binary options are mostly traded on unregulated exchanges and turn for frauds. As an investor you must consider the risk you can manage and mitigate. Binary options have similarities to bank deposits, because the risk is fixed. You cannot lose more what you have invested in one position. Of course, payouts are higher, but investments are riskier due to the fact that they a not protected by governments. In most cases the compensation from bank deposits does not even cover inflation and is several times lower than the payout from alternative investments.
If we think far and wide people gamble their entire lives. This is something you must do if you want results in your personal finance. Binary options the same as the other financial instruments can be considered gambling, however with a higher level of risk. Binary options are very addictive because everyone even if they do not have any knowledge about stock markets can predict future outcomes. And here comes psychology of human behaviour– depression, anger, greediness… When any of these symptoms appear, you as trader will start trading outside the box. Many immeasurable solutions may be taken and invested capital lost. So be aware!