How high is the risk when trading binary options?

Trading on the stock market is always a game of chance. Even very experienced traders can never be sure that they are always betting on the right securities and can therefore never say whether a high return or a high loss is imminent. Because there is always a bit of luck involved, which you either have or you don't.

For this reason, more and more traders are opting to trade binary options. These are relatively easy to understand and understand and - in contrast to other contracts - entail a low level of risk. Especially when it comes to losses, a lot can be controlled with binary options. And even if the risk is not quite as high, it is still possible to make a good return. So why not trade binary options?

What is the risk involved in trading binary options?

The risk always lies in the loss. As with all other contracts. If you bet on the wrong underlying assets, the money invested can quickly be gone. And since the terms are sometimes only a few seconds or even minutes, in the worst case the money is gone particularly quickly.

Even experienced traders do not always have an overview of the market and cannot predict what will happen in the next few minutes. You should therefore always bear in mind that you can not only make good money on the stock market, but can also quickly lose the money you have worked hard to earn in advance. It is therefore always advisable to approach trading with a great deal of caution and not to put all your eggs in one basket.

How can the risk be kept as low as possible?

You can never rule out a certain amount of risk. Not even with binary options. However, you can minimise it. And you can minimise it if you are familiar with what you are doing. Only bet on underlying assets that you know and have a connection with. If you are familiar with currencies, then bet on currency pairs. If you are interested in commodities or precious metals, then choose underlyings from this area. The more knowledge you bring to your trading, the fewer risks you take.

Also, do not ask for too much. If the advertised return is particularly high, this also applies to the loss. Therefore, always start by investing in underlying assets with a low return. Familiarise yourself gradually and learn something about trading and the processes. Observe the charts and look at the economic calendar, which shows you quite clearly how an underlying asset can develop.

If you are a layman, then look for a broker that offers a demo account. This allows you to practise trading at your leisure without having to invest your own money. In addition, only ever invest small sums at the beginning. A maximum of 10 per cent of the money in your account with the broker. This way you will still have enough capital if you bet on the wrong horse.

Don't expect too much. A profit has to build up gradually. Even if you have been lucky once, this does not mean that you are an experienced broker and can now risk a lot. Always remember: profit and loss are very close together on the stock market.

Simone Aescher

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Simone Aescher is the founder and operator of the successful crypto blog aescher-ai.ch.

After studying business administration at the Frankfurt School of Finance, she gained over 5 years of professional experience in the financial sector. However, her passion has always been the financial markets and investments.

In 2019, Simone Aescher finally turned her hobby into a career and founded her blog. She shares her in-depth knowledge of shares, ETFs, cryptocurrencies and much more.

As an active trader, Simone is constantly testing new brokers, robo advisors and trading apps. With her honest product reviews, she helps her readers to separate the wheat from the chaff.

With her academic background, many years of experience and practical expertise as an investor, Simone Aescher combines the ideal prerequisites for competently analysing and evaluating the financial markets.

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