The global roll out of broadband Internet means that many forecasters are predicting a boom in online trading. Millions of people who have never traded in financial markets before could become avid online traders. Although online gambling in the US is illegal, there do not seem to be any laws prohibiting online binary options trading. In the UK online binary options brokerages can be licensed under existing financial instrument trading and betting laws. However, brokers tend to base themselves in countries such as Cyprus and Malta noted for their relatively relaxed financial regulations, therefore, if a speculator manages to beat their trading systems we only have their word that they will pay out.
The three main types of online trading platforms include those used for spread betting, margin trading and digital binary options trading. Spread betting and margin trading similarly to short-selling stocks can result in substantial profits, but investors can also lose multiples of their initial investments. With binary options trading, the speculator gets a 70% to 80% profit if their prediction is correct, but if their prediction is wrong then depending on what brokerage they use 85% to 100% of their initial stake could be lost.
The following GSBM advice should be considered before you open any online binary options trading account:
1. Because there is relatively poor regulation of online binary options trading, the best alarm signal against any rogue companies will come from the online trading community itself. Try to source information from blogs and reviews that do not display any online binary option brokers sponsored links.
2. Carefully read all terms and conditions in the small print on the online brokers website, if there is anything which is unclear call their customer service, if they are evasive and do not provide digestible answers do not sign up.
3. Be clear about the nature of any fees or other terms and conditions relating to pay outs, account holding costs, minimum and maximum trade amounts, withdrawals fees and deposits. Ask about any conditions applicable from accepting any of the bonus deposits, which most online platforms offer to entice clients to deposit bigger cash deposits into their trading accounts. Quiz them about the security of their system, ounce again if their explanations are vague do not sign up.
4. Despite the slick advertising, binary options trading is not a scam nor will riches appear any time soon. However, being in the money more often than not with successful trades does require a passion for trading, patience and time to learn and implement effective trading strategies. It is wise to develop sooner rather than later an understanding of market psychology, chart analysis in multiple time frames, financial risk management and emotional control.
5. Do not leap in with big deposits on day one, deposit just enough cash to trade minimal amounts and to allow experimentation with your strategy. It is also necessary to become familiar with the nuances, and glitches of your trading platform. Do not deposit larger amounts into your trading account without a proper financial risk management plan, in other words always spend comfortably within your means. Do not increase your deposit amounts until your trading strategy results in your trading account, being in the money a lot more often than out.
6. Most online platforms display asset price movement charts, which are bare bones and not suitable for serious market analysis. Therefore, use well regarded real time stock chart websites such as FreeStockCharts.com. Do not trade with any online binary options trading platform displaying asset values and price movement charts, which do not mirror data on bona fide real time market feeds.
There is disagreement between financial experts about the benefits or otherwise of online trading. Some commentators say that the increased volume of asset trading is beneficial for the markets. Traditional brokers fear that the online platforms are driving down commissions. Others commentators argue that high volume short-term trading encourages market volatility. Who can predict whether or not the now increasingly sober minded financial industry regulators will become antagonistic towards online trading, or whether the risk taking aspect of human nature will prevail.