What are the risks of the Binary Options market?

What are the risks of the Binary Options market?

As you know, trading in financial markets is always associated with some risks, binary options only their magnitude varies – some market is more risky, it is obviously safer to invest in some. In fact, any trade is a search for a balance between the desire to earn and the ability to lose.

Binary options – the market is still relatively new and not fully unexplored, because not everyone understands the potential risks of the financial area. So we will try to figure out what risks await you in the BO market, which ones you should accept, and which ones can be avoided.

Trading risks.

No strategy (excluding money management ) can give 100% profitable trades on a permanent basis – this is a grail and a utopia. Coming to the exchange, you should understand that trading in any market is always a risk. How much money a trader will earn depends only on him and nothing else.

Trader capital.

Of course, since this is a risky investment, in no case can you trade with borrowed or borrowed funds. You can only invest extra money in trade, for example, that you save from your salary, money from a bonus or from additional sources of income.

Purely psychological restrictions will act here – the fear of losing everything and the desire to make money faster. All this is incompatible with real trade, since it interferes with an adequate assessment of the situation. Remember, passion and Binary Options greed are the main enemies of the trader.

Tip: mentally say goodbye to the money set aside for trading, that is, imagine that you have already lost it. This will make the task easier and will make it easier to deal with losses – emotions will not interfere with the process of market analysis and strict adherence to the rules of the system.

Trading system.

The first step is to develop your own or find a ready-made and proven trading system . A ready-made strategy must meet some characteristics: have more than 60% of successful entries, describe the market pattern that you understand, and match your trading pace. If the strategy for some of the parameters does not suit you, you will not be able to trust it, which means that the system will not work as expected.

But finding a profitable system is only half the battle. Despite the fact that the risk in binary options is always fixed and known to the trader in advance, this does not negate the importance of calculating possible losses in advance. Therefore, the second half of the system is money management (or money management ).

Calculating the size of the bet.

When calculating the optimal bet size, several factors must be taken into account at once:

First, determine the maximum number of simultaneously open rates. In any case, even if you are a super aggressive trader, the relative size of the bet should not exceed 10% of the deposit. A more adequate risk in normal trading is 2-5% of the deposit. If the strategy, for example, allows you to open up to 5 transactions, then the size of each transaction should be 1%, so that the total does not exceed a reasonable risk if all transactions are unsuccessful; Second, examine the characteristics of your trading system. The most important thing is to determine the maximum length of a losing series. As you know, what happened in the past will surely repeat itself in the future. So, if earlier the strategy filed 5 losing signals in a row at the entrance, at least you need to calculate the stock of funds for exactly the same outcome in the future; Thirdly, try not to use aggressive rate progression like Martingale if possible . The main problem with these tactics is that there is no way to stop. If the strategy involves the use of Martingale, at least limit the series of bets to three laps, so that the losing streak is not too destructive for the deposit.

BO market regulation.

When trading binary options, you can place bets on the movement of currency pairs, metals, stocks and other exchange-traded assets. However, you do not have any rights to the asset being traded, you just made a bet. That is, in the event of a collapse, you will have nothing left on your hands. This is the main difference between the BO market and the stock market, where assets are traded for delivery.

Unfortunately, the OTC binary options market is not regulated by anyone . Therefore, in case of fraud or any fraudulent actions on the part of the broker , there will be no one to turn to for help. In this regard, a broker gives you no more guarantees than a regular casino . Therefore, for the most part, his name works for the reliability of the broker. If a company has been on the market for a long time and feels good, there is no reason for concern, since maintaining a good name is usually more important, and all troubles with customers are resolved within the legal framework.

Choosing a broker.

In the long term, choosing the wrong brokerage company is a big risk, since the profitability of your trading on the BO market depends on the broker and his trading conditions.

The main problem is not even the presence of a large number of scammers on the market, but the fact that traders often do not read the fine print in the user agreement, where potential problems of cooperation with the company are buried. Usually, it is enough to read the contract between the company and the client to understand whether the fraudsters are in front of you or not. Therefore, when you first meet a potential broker, first of all, open the full text of the agreement / user agreement and carefully study it:

Where does the company get its quotes from (for Po.cash example, Reuters is a reputable source); What are the restrictions on the deposit / withdrawal of funds (temporary or in cash); What are the rules for working out bonuses (trading turnover, the possibility of withdrawing profits, and so on).

It will not be superfluous to study reviews about the company on the Internet and on specialized forums . If a company regularly deceives customers, this will certainly manifest itself in the form of negative reviews from former partners and traders.

Output.

In fact, having avoided some pitfalls, trading in the Binary Options market is not more risky than any other. Binary options are just a tool, and if you see an opportunity here to make money, Binary Options you should use it. But, as with any business, there is no need to rush and try to jump over your head. However, certain market characteristics require your vigilance and understanding of the rules of the game.