There are a few reasons that many traders prefer binary options. These are:
They are easier to understand. A person does not have to have a great deal of knowledge about a market to predict whether an option will increase or decrease. All that is needed is a belief that the option will move in a certain direction in a given time period.
Binary options are less complicated. Knowledge of shares, stop losses, and other complicated issues in the stock market is unnecessary because these are not factors in binary options. They have a controlled and publicly known risk to reward ratio. That is, the trader knows ahead of time what the odds are of movement in either direction as well as how much they may gain or lose in either situation. The risk is finite. The most a trader can lose is the amount that they paid for the option contract. A person can never lose more than they paid up front. There is a set payout. Regardless of how much the option increases or decreases in value, the trader receives the full payout if they merely predicted the direction of the movement.
They have a set time frame. Binary options are settled on an agreed-upon date, called an expiration date. This relieves traders of the worries of when and if to sell. The length of this time frame varies with the market and can be anywhere from 30 seconds to a year.
Liquidity is not an issue. For people investing in stocks and commodities in the traditional way, their investment and its dividends are only accessible if they can sell the asset. In binary options trading, no assets change hands and thus their liquidity is not important. It is one of few ways to make money on an asset that a trader predicts will lower in value. Most trading strategies and analyses work just as well for binary options trading. If anything, they work even better because the prediction needed is less precise: a simple direction of movement. Traders with limited capital can purchase them. The buy-in can be as little as $10, and is never more than $100. If a person wants to purchase more, they can simply buy multiple options. This makes binary options trading well within the financial capabilities of the average American or Western European.
