Review of trade brokers::What Is the Role of Broker in the Financial Market
Review of trade brokers::What Is the Role of Broker in the Financial Market
Trading on the financial markets has been reserved to a selected few for many decades. Only professional traders with solid expertise were allowed to trade and the investments required were not for the masses. However, since the internet boom, more and more people have access to the financial markets, and the minimum investments dropped to levels accessible to anyone. Now there are many online brokers that accept retail customers with small investments of below one thousand dollars. Because of these new opportunities, many people have tried their luck on the financial markets, and started to trade. However, there was still an inconvenience that kept the large masses from trading. Trading requires deep knowledge and understanding of the phenomenon. Every trader must be comfortable with the complicated financial terms like leverage, spreads, margin calls, slippage and so on. If you don't know the basics, you are still unable to trade on the financial markets. This is where binary options trading came into place. Retail brokers were looking for the easiest way to attract new clients, and making things less complicated was a must. This is why binary options trading became more and more popular starting 2010 and many binary options brokers emerged. Binary options are the simplest form of trading. You only need to predict the direction where the market will go: up or down. If you think that the value of the asset will appreciate by the end of the hour, you buy a "Call Option" with the expiry at the end of the hour. You have predefined returns, so you know exactly how much you win. To make it simpler, I will give you a short example: let's consider that the Oil price is 97.58 $ / barrel at 15:00. You estimate that the price is going to rise in the next four hours as recent news was released regarding turmoil in the Middle East. In this situation, you buy a "Call Option" on Oil with the deadline at 19:00. The profit rate for such option is usually around 75%-80%, depending on the broker you are using. If the Oil price is higher than 97.58 at 19:00 your option will be a winner, and will bring you a 80% profit in only four hours. The amount you wish to invest in a single option can vary depending on your total investment, the risk / reward ration that you are going to take and the broker limits. Most binary options retail brokers have their limits ranging from $25 to $2,500 for a single option, but you can buy more options if you are aiming for higher profits. There are many advantages of using binary options trading compared to classical trading: - You know exactly how much you risk, since you pay the price of the option when purchasing it. You can't lose more than the option's price. - Many brokers offer a small refund when the option finishes out of the money. This means that you will sometimes recover a part of your investment (10% for example) even when losing. - No need for setting stop loss or take profit orders. You know exactly how much you risk, and how much you get. Binary options trading is also referred as fixed returns trading. - You can trade on all major markets. Brokers offer binary options on forex rates, commodities, indices and even major stocks like Google, Vodafone, Apple or IBM. - You can make profits no matter where the market moves. If you predict an asset will drop in value, simply buy a "Put Option" and profit from the falling market. This makes binary options profitable during crises as well. - Minimum investments required are much smaller. You can open an account with a broker with an investment of only 100 dollars. - Buying an option take a few seconds, so you can execute your trade instantly, making news trading much easier. Considering the above mentioned advantages, it is no wonder why many people are choosing binary options and even experienced traders are shifting towards the new trend. |
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