Opportunities and risks when trading binary options

[sc:BDSwissRBanner]The Trading with binary options offers different Opportunities and Risks. Before beginners start trading with real money, they should get an overview of the opportunities and risks in order to Realistic requirements to the trade. Often these are misconceptions and imaginative expectationsthat stand in the way of the trader himself. Enormous returns are indeed possible when trading, but only under certain conditions. This requires a clear approach.

The risks involved in trading with binary options are of a different nature. In order to draw up a suitable list of risks, a distinction should first be made between the risks. The risks should be divided into the following categories:

• Risks of the asset class: The risks that only occur when trading binary options
• Risks of the market: The risks that generally arise when trading financial products
• Risks of the provider: Risks that are exclusively embodied by the broker
• Risks of the retailer: These risks lie in the person of the retailer himself

The risks will be briefly outlined here and a suitable Instrument for minimising these risks be proposed.

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The risks of the asset class

A risk in the financial sense describes an event that, when realised, is associated with a financial damage goes hand in hand. Risks in the sense of stock exchange trading are therefore events, which lead to a loss in value of your own account. The Trade with binary options is a type of exchange trading.

The Asset class risk is a type of risk that is embodied exclusively by the asset itself. The asset at this point is the binary option. It entails certain risks, iwhich are unique in their appearance. A risk of binary option is the loss of the capital with which the option was purchased. Particularly important for the binary optionthat the risk of loss is not associated with a variable loss, but rather depends on the realisation of an event. If the corresponding event does not occur, the capital is completely lost. In the case of a share, for example, the amount of the loss depends on the Time of sale and is therefore to a certain extent the responsibility of the trader. To ensure that the loss of individual positions does not lead to a total loss, the trader should no longer than 2-4 per cent of its capital.

Risks of the market

When trading with financial products There are always certain risks on the stock market. Since the binary option for a Derivative on another financial product, the risk depends on the type of the so-called Underlying from, on which the option is mapped. This can either be a Share or also a Currency pair act. These systematic risks, which are always Stock exchange trading cannot be eliminated by certain instruments, but always exist. A typical market risk would be the collapse of an entire share price.such as the DAX benchmark index. The decline in the EUR/USD currency pair following a News publication would be typical in this respect.
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Risks of the provider

Regardless of which Financial instruments traded, private traders have to rely on some form of Provider to fall back on. The nature of the risks posed by this provider logically depends on the type of provider involved. At this point, trading with binary options which is why a broker is considered as the provider.

The broker is involved in trading with binary options the trading partner, as it takes the opposite position. Unlike the Foreign exchange trading losses are not transferred to another market participant, but to the broker. The provider's loss is the trader's gain, which is why he is the direct counterparty. This constellation gives rise to a number of risks that must be minimised in the context of a legal Regulation can be eliminated. As a trader, you should pay attention to the pricing and check where the broker obtains its data from. If the broker unfavourable exchange rates, this should be avoided. Testimonials and tests are a suitable means of detecting black sheep.

Risks of the retailer

As with any type of Stock exchange trading there are certain risks that emanate from the retailer itself. As a rule, these are psychological risks. This does not refer to the trader's stress caused by trading, but rather to basic psychological assumptions, which could lead to a negative trading result.

Most of these phenomena are summarised under the term Behavioural Financei.e. the behavioural research of financial actors. Behavioural rules for trading can be formed from this scientific disciplinewhich can minimise the risks of a person's natural instincts. An example will illustrate this:

The Trader decides for himself when to execute an order and what price development he expects. However, if, like most people, he is subject to certain Behavioural tendenciestriggered by our primal instincts, he tends to risky behaviour. For example, if he has three binary options and was right with his forecast for all three, he will instinctively get the impressionthat he is a be a good dealer. In fact, however, it is not his achievement, but that of the market. The probability of a binary option to win is 50 per cent. He will now tend to take more risks, as he believes he has the skills of a good trader. As a rule, he will risk too much and could, with the wrong option, jeopardise the previous profits lose. As a rule of thumb, traders should make sure to take a break or end the trading day in the event of a losing or winning streak. With Increased probability otherwise the behaviour will be too risky.

The opportunities of trading binary options

The opportunities of the Trading with binary options are obvious. Due to the fact that most brokers offer leverage, it is possible to make a profit with just a small amount of capital. high profit to generate leverage. For example, if the broker offers a leverage of 200, For example, a binary option worth € 20,000 can be traded with a paid-in capital of € 100. A single option can be used to Returns of 80 to 200 per cent are generated. Taking into account all the risks listed here, as well as the application of the Instruments to eliminate these risks can Retailer generate enormous returns. It is therefore important to keep an overview of the risks and minimise them. The returns then come automatically and increase with time. Review.

 

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