PROSIs it profitable to invest in binary options?


  • The answer is yes! Binary options are very profitable, but be careful that does not mean it is easy to win: they are indeed very risky!

    There are two aspects that make binary options convenient to invest in, one is profit-time ratio and the other is profit-volatility ratio.

     

    • Profit-time(high profit in less time)

    Working with binary options, in a short time we can achieve returns between 70% - 85% on each gain operation, difficult to achieve if we invest in other financial instruments.

    The high returns achievable by investing in this instrument, allows almost anyone with little investment sum to easily participate. So how can we make the most of this profit-time ratio?

    Since we can achieve good returns in short times it is good to choose a low size investment in order to do many operations.

    This type of operation not concentrated in a single one time capital investment allows us to also accept some small loss. It is important to have the number of successfultransactions to be at least 60%.

    A strategy which allows us to achieve good performances is to use a trading style based on sentiment analysis. The trading strategies based on sentiment analysis are all those strategies that take advantage of the reactions of the moment, not caused by any kind of fundamental event.

     

    • Profit-volatility

    After analyzing the profit-time ratio, another aspect traders should consider is the return-volatility ratio.

    Investors in binary options can obtain significant profit assured even in the presence of low volatility, as the trader's profit is not tied to the amplitude of the movements but rather only to movement in a certain direction.In fact it would be too difficultreplicating the same success in other similar instruments under the same market conditions. But it is statistically proven in presence of high volatility the best probability of success can be reached with greater consistency.

    After haven analyzed the relationships between profit to time and volatility variables, a third ratio following, is time-volatility. From an operational point of view how can we make the best use of this ratio? A useful tip is to combine short time operations in presence of high market volatility (even knowing that volatility does not affect profits) so that you can make the most of sentiment strategies, i.e. strategies based on the instant opinion that different operators have.

    So the question is, "is it profitable to invest in binary options?” at the same conditions in a low-average market volatility and with the opportunity to achieve sure profits, the answer is yes.

    Each type of financial instrument has its pros and cons, everything depends on the trader and his ability to mitigate the negative aspects and take advantage of the positive aspects.

Interviews

  • the Analyst's answer

    Jean Grossett - Financial analyst

    Having a general understanding of how trading works makes it easier to attain consistent success in any trading discipline, binary option is no exception.

    Consistent success in any form of trading is pivoted on having a statistical or high probability edge, binary options though gaining high promotion on the internet based on its simplicity of opening a trading account which is as simple as clicking a mouse button.

    Most traders who go into forex trading are often faced with the challenge of living their trades to run in a set and forget mode. They often interrupt their trades, either by exiting too early, or by moving their stops when the current market price gets close to their stop loss level.

    Enter binary options trading, which offer a different approach to trading the forex market and it has different advantages over regular forex trading. These are as follows:

    Human Errors

    Binary options drastically reduce human interaction errorwhen entering trade position. Unlike forex trading where a trader can forget to set stop loss levels, enter a wrong lot size, or take profit. Binary options is a more user-friendly approach to trading in that there are two common errors which are ,placing a trade in a direction not intended, or entering a wrong value of entry point.

    Trading Cost

    Unlike forex trading where you are charged a cost in spread and swap if you hold a position over night, in binary option such charges does not exist.

    Leverage and Margin

    As binary options traders, leverage and margins are only found in the world of forex trading. So no fear of margin calls, and humongous leverages which leads traders into reckless trading.

    Volatility and Slippage risk

    Flash crashes, though their occurrences are not too common in forex trading, but can be detrimental to traders account. When this kind of volatility occurs, a trader’s position often gets closed in a loss more than he or she bargained for only for the market to eventually go in the trader’s direction. Also during high impact news releases like the FOMC report, traders with tight stop loss often get closed out at a price which results into more loss in the form of slippage. All of these are not possible with binary options trading, because all a trader is concerned with is the direction at the expiration time of his or her trade.

    Trade Life Span and Risk to Reward Ratio

    With binary option trading you are mainly concerned with your trade’s expiration time, which could range from one minute to an hour, unlike forex trading which gives you total freedom to exiting your trade position. This freedom can become a disadvantage in the sense that a trader can frequently second guess his trade through some psychological influences. With binary options you will always know your risk which is fixed, hence you will not be bothered about evaluating risk to reward ratio for every trade you enter.

    Binary options offers a very low barrier to entry, in which if combined with order flow and a trading edge within 65%-70% reliability could lead to consistent return on investment

Members Comments

  1. Binary option can be profitable if advanced technical analysis is used. Most of the option have expiry ranging from 60s to 5m. Mostly used indicators are RSI, MACD and Bollinger Bands. Binary option can be traded on short time frame as well as longer time frames depending on trader’s choice.

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