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Binary Options for Dummies Review

Binary options trading is one of the fastest growing industries in the financial sector. Some purists think it’s merely short of gambling, however, successful binary options traders work hard, doing research, back-testing strategies and develop solid foundation of money management.

So why all the buzz? Well, trading binary options require a low barrier of entry, you don’t need a lot of money to open an account up, and hence why brokers market binary options for beginners. Second, it’s very easy to understand, unlike vanilla options which require you to understand several components including volatility, time decay and movements of the underlying currency pair. A binary options trade is simply a bet that a currency pair will be higher (call) or lower (put) by a specified period of time. The risk is pre-defined as is the payout.

Let’s face it, trading Forex isn’t simply binary options for dummies but rather it involves substantial risk because you are trading a leveraged product. Leverage is a double-edged sword. Yes, you have more buying power, however, your risk of loss can be substantial. Most FX brokers will close you out of your trade right before your account balance goes to zero. How you size your trades becomes important. If you size incorrectly, your account can go to zero quickly. With binary options you are not leveraged. You don’t need thousands of dollars to get started. You know how much you can and lose. As you can see, this is another way for a small trader to get involved with some of the biggest markets in the world and trade binary options for a living.

No sleepless nights from overnight risk, no need for stop-losses, no blow out risk or fear of being exercised or assigned (something vanilla option traders must watch).

In some ways, trading binary options could be the first steps to new traders before they move to trading more sophisticated products that include leverage and undefined risk/reward setups. You see, the same methods applied in selecting a binary options trade can be applied to other forms of trading.

Now, because of this industry is hot, there have been some bad companies out there that have tried to take advantage of traders. One of the issues it that not all firms are regulated, identity theft and failure to payout customers. Traders need to be aware of this. The argument can be made that this also happens with regulated firms. One only has to look back at Bernie Madoff and MF Global. This should not discourage traders, however, they do need to conduct due diligence on their broker.

As growth continues, more and more firms will have to make the necessary changes to show transparency. There will always be marketers pitching the next get rich scheme. Trading binary options is not a get rich scheme. It requires hard work, research, smart trading and a little bit of luck to be successful. Not only that, but money management is essential if you want to be successful. This is the same for any format of trading.

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