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Binary Options: The Facts And The Fiction

Binary Options: The Facts And The Fiction

Binary options are a rapidly growing business. More and more brokers with more and more regulations are popping up every day. The problem is that the industry is still operating on the fringes of the internet with regulatory agencies operating on a very localized basis. This, along with the high propensity for scams, has led to a lot of confusion about what binary options are, where they come from, and if you should be trading them.

The good news is: I have been tracking the industry for many years and am here to fill you in on the facts and the fiction surrounding this simplified form of trading.

Fact – Binary Options Are An Easier Way To Trade Financial Markets

As a tool for speculation they are easier to use than most. When compared to equity investing, standardized options, futures and forex it is better described as a simplified form of trading because the account requirements and mechanics of trading are much different. Futures, forex, commodities and standard options all require margin accounts and can expose you to unlimited risk. Depending on the type of trading, leverage can be as low as 10:1 and as high as 250:1 or more at some forex brokers.

Margin accounts are highly levered accounts that can make you a lot of money really fast, but can also completely wipe you out of the market at the drop of a hat. The most difficult aspect of trading futures, forex or options is taking profits. These types of positions are subject to every move of the market, many are affected by the passage of time and all are impeded by slippage. Positions that move as predicted don’t always generate profits.

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Trading binary is much simpler than that. You pay a set price at the open of the trade, are only exposed to that amount of loss, and have a fixed return upon expiration of the contract. All that is required is to move the underlying asset in the direction of choice.

Fiction – Binary Options Trading Is Easy

Let me rephrase that, successful binary options trading is easy. It’s easy to trade binary, all you have to do is do it, but being successful is not easy. By reading the average run of broker homepage, you’d think all it takes is to pick an asset, choose a direction and reap the profits but the reality is that more than 90% of all traders get washed out of the market. The same can be said for other forms of trading as well, it’s pretty easy to buy and sell securities, all it takes is an account with a broker and you are in business. Doing it successfully, making consistent profits, is very hard.

Profitable speculators spend years, if not decades, learning the market in which they trade. They have an in depth knowledge of market mechanics, as well as technical and fundamental analysis that allow them to form educated opinions, thus positioning their accounts to take advantage of these opinions. Just because binary trading is simplified in terms of account mechanics, margin and profit structure does not mean trading them is any less hard. The underlying market, fundamental and technical analysis are the same, requiring the same knowledge and experience to produce profits

Fact – All Binary Options Are The Same

In essence it’s true that all binary options are the same. Binary options are a fixed return investment vehicle with a fixed price, a fixed set of conditions to be profitable. and a fixed payout upon expiration. Regardless of the style of trading, all that is required is for the preset conditions to be met.

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In the case of call/put and high/low style trading, if a trader buys a call or high position all it needs to profit is for the price of the underlying asset to move higher than the strike price at which the option was bought. The same is true for puts, just in reverse. Prices must fall or move lower than the strike price to profit. One touch options require prices to touch a set strike only one time, while range options require asset prices to remain in a range.

Fiction – All Binary Options Are The Same.

The basic structure of all binary options is the same – if yes, then you profit; if no, then you lose. The reality is that not all binary options are the same. There are at least two major classifications with some smaller categories within those two. The most important difference to understand is the method of trading. One style is based on spot prices, the other is based on strike prices.

The first category is best represented by the CySEC style of trading which is popular in Europe and other international locations. This style has only one strike price, the price of the underlying asset at time of purchase. The price of the option is whatever amount the trader chooses, with payout equaling investment plus a set return.

The second style, found primarily in the United States, is based on strike prices and often referred to 0-100 options. This style utilizes a list of set strikes whose prices range between 0 and 100 depending on whether they are higher or lower than the spot price. Traders choose strike and expiry. If the asset spot price closes above/below that strike they receive $100 and profit the difference between purchase price and pay out.

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Fact – You Can Make Fast Money Trading Binary

It is true, payouts for most types of binary options start around 70% and go up to over 500% depending on what type of options you are trading. Believe it or not, US regulated exchanges like NADEX and Cantor Exchange have some of the highest payouts for standard call/put style binaries. An at-the-money option may cost $50 and pay $100 at expiration for a return of 100%, higher than the average 80% return you find at a CySEC/EU style broker. On top of high returns is a high speed of return. Some binaries expire in as short as 60 seconds, others range from 5 minutes to 1 hour, 1 day or 1 week.

Fiction – You Can Get Rich Quick Trading Binary

It is possible to get rich trading but it is not likely. First of all, trading is risky and difficult to do successfully. If it was possible to get rich quick then everybody would do it and no one would be able to make money with get-rich-quick-schemes. The speed of trading is also working against the average trader. It is possible to lose money just as fast as it is to win it. On top of that many brokers brokers have stops in place to prevent any wild successes. These are often found at off-shore style brokers. The most common way is to limit the size of the trades. If you can’t make a big trade then you can’t make a big win. Some will limit trade size to a percent of your account, so any trades above that amount won’t count toward your balance. This is an often overlooked fact that has caused confusion for many would-be traders in the past.

Fact – There Are A Lot Of Scams In The Binary Options Industry

You have to be extremely careful when looking at any broker, offer or service. Scams range from fake brokers to fake regulators and can include complex sales funnels, shady account managers, auto traders, trading software, robots, signals and just about anything else a crafty marketer can think up. One reason is a lack of international standard or regulation. The industry came to life in the gray areas between countries and regulations. Since the industry exists almost entirely on the internet regulating it is very difficult. Anyone with a URL and the money to buy a trading platform software package can open a new broker or signal service in a matter of days.

Fiction – All Binary Options Brokers Are Scams

This is not true. There have always been brokers operating legitimately and the number of those is only growing. At the same time, regulators around the world are stepping up and taking control of the situation in their region. The US was the first to adopt such rules and is the strictest of any jurisdiction. At this time there are only two places to trade, NADEX and Cantor Exchange – although Cantor Exchange is working with top technology providers to create opportunity for even more brokerages to begin business.

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Cypress started regulation in Europe when CySEC recognized binary as a financial tool and not just gambling. Since then, several developments have helped to cement this form of trading in the EU including a recent Dutch ruling on binary as well as impending regulation from Britain’s Financial Conduct Authority. Other nations which have adopted regulations include Japan, Australia, New Zealand and Canada.

The trouble for would be traders is two-fold. First, there are more website offering scams than there are fighting them and new scams appear every day. The second problem is how the lack of centralized regulation causes as much confusion as it solves. This 24Option scam review is a good example. This broker is well known (more on this below), has been in operation for many years, is CySEC regulated, and yet still receives warnings from the US and Canada.

Fact – Binary Options Is Here To Stay

Many have doubted the longevity of this style of trading but sources show it is only gaining momentum. In Europe, TechFinancials has become the first technology provider and broker to become a publicly traded company. This move shows the public’s acceptance of binary as a viable business model, if not a legitimate form of trading. At the same time, 24Options (the flagship brand of TechFinancials) has partnered with leading sports teams for mutually advantageous advertising, as well as having dozens of other brands. In the US, trading volume at NADEX grows rapidly and Cantor Exchange is on the cusp of opening the market wide open. Cantor is focused on bringing the same type of white label access to the US as is currently seen in Europe. This will allow new brokers to open up shop and provide binary alongside their proprietary products. Three technology providers are part of the process thus far: SpotOption, Tradologic and TechFinancials.

The Bottom Line In Binary Options

Binary options are here and they are gaining in popularity and safety. They are embraced by the worlds financial communities, entering the purview of regulators. Cantor Exchange and NADEX are leading the charge in the US, while at the same time others are making moves to solidify the industry in Europe. CySEC paved the way there and now other countries within the union are getting on board. The decision of the Dutch court to uphold CySEC, the MiFIB and EU Financial Passport is a landmark event and one that will have positive repercussions throughout the EU and possibly the rest of the world. This affect is already being seen in England where regulators and legislators are making plans to establish London as a hub of binary trading.

Meanwhile, the industry is still plagued by scams so it is very important for anyone pursuing this avenue to do their due diligence. There is a lot of gray area in which scammers and shady brokers can operate. There’s no end to depth of scams these people will perpetrate. The only true protection is to stick with reputable brokers that are regulated in the country in which you reside.

Featured photo credit: www.vpsi.org via commons.wikimedia.org

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Last Updated on January 2, 2019

How Personal Finance Software Helps You Get More Out of Your Money

How Personal Finance Software Helps You Get More Out of Your Money

Do you know what mental health experts point to as the biggest cause of stress in the United States today? If you said “money,” then ding, ding, we have a winner!

Three out of four adults today report feeling stressed out about money at least part of the time. People are either worried about not having enough money or whether they’re putting the money they do have to use in the best possible way.

Your money is either in charge of you or you’re in charge of it, there’s no middle ground. Using some type of personal finance software can help alleviate some of that money stress and better allow you to manage your money effectively. Without it, you may just be setting yourself up for constant financial worry. Life is already tough enough and there’s no need to make it more difficult by simply hoping your money issues will all work out in your favor. Hint: they won’t.

This guide will help you to understand how personal finance software can better assist with both accomplishing long term financial goals and managing day-to-day aspects of life.

Whether it’s tracking the savings plan for your child’s college fund or making sure you won’t be in the red with the month’s grocery budget, personal finance software keeps all this information in one convenient place.

What Exactly is Personal Finance Software?

Think of it like the dashboard in your car. You have a speedometer to tell you how fast you’re going, an odometer to tell you how far you’ve traveled, and then other gauges to tell you things like how much gas is in the tank and your engine temperature. Personal finance software is essentially the same thing for your money.

When you install this software on your computer, tablet, or smartphone, it helps to track your money — how much is going in, how much is going out, and its growth. Most personal finance software programs will display your budget, spending, investments, bills, savings accounts, and even retirement plans, levels of debt, and credit score.

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How It Leads to Financial Improvement

It shouldn’t come as a surprise, but people who regularly monitor their finances end up wealthier than those who don’t. When you were a kid, keeping track of all of your money in a porcelain piggy bank was pretty easy. As we get older, though, our money becomes spread out across things like car payments, mortgages, retirement funds, taxes, and other investments and debts. All of these things make keeping track of our money a lot more complicated.

Some types of personal finance software can help make things a little less complicated, setting you up to meet financial goals and taking away some of the stress associated with money.

Even if you already have a Certified Financial Planner (CFP) some type of personal finance software can be of great benefit. Whereas CFPs focus on the big picture of your money, they don’t handle the day-to-day aspects that determine your overall financial health.

It’s also not nearly as complicated as you might think and can take out a lot of the tedium that comes with doing everything on an Excel spreadsheet or with a pad and pencil.

Types of Personal Finance Software

When it comes to personal finance software, it generally fits into two categories: tax preparation and money management.

Tax preparation software such as Turbo Tax and H&R Block’s software can help with everything from filing income taxes to IRS rules and regulations and even estate plans. Plus, there’s the benefit of filing online and getting your refund check a lot faster than if you were to mail off your forms after waiting in line at the post office.

For the purpose of this article, however, will be focusing more on the personal finance software that aids with money management.

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Money management personal finance software will help you to see the health of your cash flow, pay down debt, forecast for expenses and savings, track investments, pay bills, and do a host of other things that 30 years ago would have practically required a team of accountants.

When to Use Personal Finance Software

So far we’ve gone over what exactly personal finance software is and how it can be a benefit to your money. The next logical step in this whole equation is determining when it should be used and how is the best way to go about getting started using it.

Below are four of the most common and practical ways to use personal finance software. If all or any of these apply to you and your money, then downloading some type of personal finance software is going to be a smart move.

1. You Have Multiple Accounts

There’s a good chance that when it comes to your money, it’s in more than one place. Sure, you probably have a checking account, but you may also have a savings account, money market account, and retirement accounts such as an IRA or 401k.

If you’re like the average American, you probably have two to three credit cards as well. Fifty percent of Americans also don’t have loyalty to just one bank and spread their money across multiple banks.

Rather than spending hours typing in every detail of every account you have into a spreadsheet, many programs allow you to easily import your account information. This will help to eliminate any mistakes and give you a bird’s eye view of everything at once.

2. You Want to Automate Some or All of Your Payments

Please don’t say that you’re still writing out paper checks and dropping each bill in the mailbox. While it’s noble that you’re doing your part to keep postal workers employed, we’re 18 years into the 21st century and you can literally pay every bill online now.

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There’s no need to log into every account you have and type in your routing number either.

With personal finance software you can schedule automatic payments and transfers between all of your imported accounts. Automatic transfers will help to make sure you have the necessary funds in the right account to ensure all bills are paid on the appropriate date. Late fees are annoying and do nothing but cost you money. It’s time that you said goodbye to them once and for all.

3. You Need to Streamline Your Budget

Perhaps the best feature of personal finance software is that it allows you track everything going in and out of your virtual wallet.

Nearly every brand of personal finance software out there has easy-to-read graphs and charts that allow you track every cent you spend or earn, should you choose. You might be pretty amazed when you see just how much you spent on eating out last month or if you splurged a little more than you should have on Christmas gifts last year.

Every successful business on the planet has a budget and using personal finance software can help you trim the fat on your spending in ways that affect your everyday life.

4. You Have Specific Goals to Meet

Maybe it’s paying off debt or saving for up something like a European vacation. Whatever your financial goal is, whether it’s long-term or short-term, personal finance software programs are one of the savviest ways to go about reaching those goals.

You can do everything from set spending alerts to notify you when you’re over budget to automating what percentage of your paycheck goes to things like retirement investments. The personal finance software that you choose should show you exactly how close you are to hitting those goals at any given time.

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How to Get Started

From AceMoney to Mint and Quicken, there ’s no shortage of personal finance software apps out there. Many of these programs are free to download and will allow you to pay bills, invest, monitor your net worth and credit profile, and even get a loan with the swipe of a finger.

Other programs may only offer you limited services and will require a one-time fee or subscription to unlock all that they offer. These fees can often vary from as little as two dollars to 50 bucks a month.

It’s best to start off with the free version and then gauge whether you’re able to accomplish everything you’d like or if it’s worth exploring one of the paid options. Often times the subscription programs come with assistance from financial planning and investment experts — so that can be a real benefit.

When deciding which personal finance software program to use, it’s also important to look at how many accounts you wish to monitor. Certain programs limit the number of accounts you can add. Be sure that if you have checking, credit card, and investment accounts to monitor, that you choose a service that can monitor them all.

Finally, when looking around for the right personal finance software that meets your needs, make sure that you’re comfortable with the program’s interface. It shouldn’t be expected that you recognize every single feature instantly, but if the features don’t seem readable and manageable to you, then you’re not as likely to use it and get the full benefits.

Final Thoughts

Personal finance software can go a long way in helping you to take control of your money and meeting your financial goals. It’s important to note, however, that some focus more on budgeting and expense tracking while others prioritize investing portfolios and income taxes. Explore several different programs and read reviews to find the one that’s right for you.

In this day and age, managing one’s personal finances in a secure manner that allows the user to have a real-time visual representation of their money is easier than ever before. With the numerous applications that are out there — both free and subscription-based — there’s no reason that every person can’t take control of their money and ensure they’re making smart money moves.

Featured photo credit: rawpixel via unsplash.com

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