No matter how experienced an investor is, he or she always wants to know the same thing first: Is trading in the binary options market as secure as the traditional options market?
The simple answer is yes – below are just a few of the many reasons why.
One – The binary options market is not complex.
Many times in the traditional options market, the market makers can introduce new products simply to confuse the average investor. If an investor does not understand an investment, it is difficult for that person to profit even if the asset behaves normally.
The binary market cannot behave in this way because of its natural simplicity. A normal binary option only has two choices for an investor, up or down. There are a few other ways to trade in the binary market (that will be touched on below), but the main way in which binary options are traded are always the same. This helps to keep the market secure because there are no new products to upset the balance of trade.
Two – The payoff of a binary option does not depend on the behavior of other investors.
Another reason that the traditional options market is less secure is because of the erratic behavior of investors. The price of options within that market is affected by all investors, not just the one who is making an individual decision on an individual investment. What usually happens is that every investor ends up playing the market, not investing in a company for its internal stability or sales success.
The payoff in a binary option does not rely on the behavior of other investors at all. The only thing that affects whether an individual receives a payoff or not is if that individual makes the right decision on what the option actually does in the market. This is perhaps the biggest stabilizing factor within the binary options market that is not present in the traditional options market.
Three – There are only a few ways to trade an option on the binary market.
Helping to keep the market simple is a limit on the ways that a binary option can be traded. All of the major formats for a binary option are necessary and include high/low options, touch/no touch options and tunnel options. These three formats represent the only ways in which the price of an option can move and allow investors to know exactly what kind of behavior that they are investing in.
Market makers in the traditional options market continue to make up more “exotic” ways to trade. This is an ingenious way of saying that they can rig the marketplace to take the money of investors even if investors make the right decisions on a company.
Four – Investors can trade binary options on virtually anything.
Options in the traditional market are limited to esoteric futures and the inside behavior of companies that no one except the financial elite have any access to. The binary options market is full of trades that the average person can research. This helps to stabilize the marketplace because real research is rewarded instead of shunned. This helps to bring confidence back into the market and keep money flowing in a natural manner.
Five – The market makers do not participate in the market trading.
Market makers, or the individuals and companies who actually set the price of the options, are allowed to participate in the binary options market. This is equivalent to a blackjack dealer being able to play while looking at all the cards.
There is no equivalent to this behavior in the binary options market, which means that the market is much more stable.