Stock Trading vs. Binary Options Trading – Which is Better for a Beginner?

Getting into the busy world of financial trading can be an intimidating and challenging endeavour for anyone, especially when you’re just starting out with minimal knowledge on the subject. At this point, just choosing the type of trading you want to start with can be a difficult decision. Everyone you ask will probably have their own opinion to share, and just when you think you’ve got a gameplan, you learn something new that makes you think you might have it all wrong. The best way to avoid such indecisiveness in the beginning is to take things step-by-step. Start by deciding whether standard stock trading or binary options trading would be a good fit for you based on the following 5 factors:

1. Market Volatility and Risk

Stock market trading can be quite risky due to the fact that even a slight fluctuation in the wrong direction can result in you losing some of your investment. Binary options trading is not as volatile, and you only need a small bit of fluctuation in the right direction to be able to see a profit from a transaction.

2. Long Term vs. Short-Term Commitment

Stock trading is more of a long-term commitment, as most returns in this environment are given on a yearly basis. Binary options trading is on the other end of the spectrum, as you can often get a return in less than a minute. Overall, binary options trading is a much more viable short-term investment than stock trading, and this is one of the biggest factors to consider when comparing binary options trading and stock trading.

3. Minimal Investment Amount

Investing in stocks can require quite a bit of starting capital to make it worth your while, which is why many people choose not to invest in stocks until they’re more financially secure. Binary trading options carry less of a capital commitment, making this market more ideal for most novice investors who can’t yet afford to take big risks.

4. Profits and Return Percentages

Even though trading in stocks is more expensive and is more of a long-term commitment, it also provides lower returns than most binary options trades. A typical stock trade will bring a return in the 10% range (with the average return being 7%), whereas a typical binary options trade can provide a return of up to 80% on your initial investment. Achieving a similar return with stock trading would require some luck and several years’ time.

5. Control Over Transactions

Stock trading requires the ongoing assistance of a stock broker who conducts trades on your behalf. However, in binary options trading you have a bit more control, as it is possible to choose and perform your own trades within an online interface.

Conclusion

Given that binary options provide faster results, higher returns, and a lower investment risk and while requiring less starting capital, most experts feel that this method of trading is more suitable for novices than standard stock trading.

Advertisements

Author: Kar

Dr. Kar works in the interface of digital transformation and data science. Professionally a professor in one of the top B-Schools of Asia and an alumni of XLRI, he has extensive experience in teaching, training, consultancy and research in reputed institutes. He is a regular contributor of Business Fundas and a frequent author in research platforms. He is widely cited as a researcher. Note: The articles authored in this blog are his personal views and does not reflect that of his affiliations.