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Binary Options VS. Stock Options

Binary options trading presents investors with a unique way to trade a number of financial assets. For an average trader, this can be a good thing. Even with a number of assets to be traded and the ability to make trades quickly, many people wonder if trading binary options can be as profitable as trading stock options on the traditional stock market.

The answer to this question is complicated as it varies based on the trader. However, many people will find that there are very few barriers when it comes to enter binary options trading. This ease of accessibility has led to a growth in this form of trading and will likely lead to even more investors moving towards trading binary options in the future.

Best Binary Options Tools

Stock Display on a Stock Market

There are several things to consider when comparing binary options trading with stock options. This article will help you determine which form of investment may be right for you.

How Much Money do You Have to Invest?

The first thing that you will need to consider when investing is how much money you have to set aside to use for trading. If you want to actively trade stock you are going to want to make sure that you have enough to use a margin account. A margin account is what allows you to sell stocks short.

In the United States you will need to have a margin account of at least $10,000. The reason that a margin account is necessary is because it provides you with flexibility. When you are able to trade a stock both up, which is the traditional method or down, with a short sale, you provide yourself with twice as many ways to make money.

When entering binary options trading you do not need as much money in order to get started. For as little as $200 you can open an account with most binary options brokers. However, around $500 is a good estimate of what you will truly need in order to begin trading binary options.

The average amount per trade in binary options is around $10 to $20. This means that even if you are a casual trader you will be able to trade each side of an asset with both call and put actions available.

Risk Reward Graph

The risk and the reward for both stock options and binary options is quite high. With stock options there is the chance to make quite a bit of money if you invest in the right stocks and see the prices go up over time. With binary options it is possible to make quite a bit of money in a short amount of time.

However, as with any type of investing, there is the risk that you could lose your entire bankroll with one bad move. This is why it is important to know exactly how much you can stand to lose at any given time and still be able to bounce back.

Asset Availability

One of the other big differences between binary options and stock options is the range of assets that are available. Many investors like to trade different types of assets such as gold or commodities. However, doing this requires you to be able to keep track of several different levels at a time.

When trading different assets in this way you will need to have your stock broker’s page up as well as your commodity broker’s page and you will also need to be looking over 2 different charting packages. Even if you want to trade European and U.S. stocks you will need to have two different brokerage sites running in order to do so. This can be confusing and cause mistakes to be made. When errors are made, typically money is lost as well.

When you trade binary options you can complete all of your trading through one site. You can trade indices and stocks from all over the world as well as many major commodities and currency pairs. There are many assets that can be traded using a binary options trading broker.

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Time Frames

The final thing to consider when comparing binary options with stock options is your time expectations. When trading stocks you may have to wait days, weeks, or even years in order to achieve just a small profit. Trading stocks can eat up a lot of your time as this is typically a form of long term investment.

With binary options trading you can suit your trades to meet your timing needs. It is possible to make a profit in as little as 60 seconds with binary options trading. The return for an in the money binary options contract is typically above 70 percent. This means that if you string together several winning investments you can make a lot of money in the binary options trading market.

With this being said, binary options pose some risks. These trades are typically all or nothing. This means that if you invest $100 and you lose, you are out that amount. On the other side of this, you know exactly how much you are going to risk with each trade contract that is made.

Conclusion

Binary options and stock options both have pros and cons. When deciding on an investment strategy for your portfolio, diversity is often the best strategy. There is no reason that you cannot trade in both stocks and in binary options if you have the funds to be able to do so.

Blue Stock Market Graph with Arrow Rising

No matter what type of trading that you decide to invest your time in, the most important thing to do is to come up with a long term strategy. This is the only way to keep your profits up and consistent.

When you are investing you are going to be wrong from time to time. The most important thing to do is to make sure that when you are wrong you are not losing your entire bankroll or losing so much that you dig a deep hole that you will not be able to bounce back from.

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