How Binary Trading Works

Binary options trading is one of the more popular forms of investments in the financial instrument. Some see it as simpler or more enjoyable than the typical purchase and sale of stocks and other assets. Others view it as an activity very much akin to gambling, and subject to rigged conditions and other scams.

Binary options let traders profit from price fluctuations in multiple global markets but it’s important to understand the risks and rewards of these controversial and often-misunderstood financial instruments. Binary options bear little resemblance to traditional options, featuring different payouts, fees and risks, as well as a unique liquidity structure and investment process.

Binary options traded outside the U.S. are also structured differently than those available on U.S. exchanges. They offer a viable alternative when speculating or hedging but only if the trader fully understands the two potential and opposing outcomes. The Financial Industry Regulatory Authority (FINRA) summed up regulator skepticism about these exotic instruments, advising investors “to be particularly wary of non-U.S. companies that offer binary options trading platforms. These include trading applications with names that often imply an easy path to riches.”

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