Those who have completely switched to trading binary options are few, more than those who have added them to their portfolio
In just two years, binary options have become extremely popular among traders, displacing even the tools . What are binary options and what is the secret of their popularitywe decided to ask one of the brokers, GrandCapitalThe company was the first to implement binary options in the Metatrader 4 terminal. Andrei Vinogradov, the head of GrandCapital's technical support department, agreed to answer ForTrader.org's questions.
- Andrey, what is the difference between binary options and om? It is not clear to everyone. What are the pros and cons?
- The most important advantage of trading on binary options is the limitation of loss and fixed profit. Unlike the market, where the profit or loss depends directly on the number of pips the price has passed. I think many currency traders have faced the situation when the price reached the target, but did not touch it, and after that the deal was in a bigger loss than it was expected. Or (if the loss is limited by a stop order) the price reached the stop and turned around in the direction of the target. In such cases you either have to fix losses and refuse a good deal, or risk more than you would like.
This is not the case with binary options trading. The amount of reward in case of a successful prediction and the amount of loss in case of an error are known immediately when the deal is made. These values will not change no matter how long the price goes in either direction. Another plus of options trading is the absence of spreads and simplified ways to calculate deposits and profits.
The downside to options is the expiration time. When executing a trade on an option, it is not the degree of price rise/fall that is in the foreground, but the moment when it happens. Although, it's hard to call it a minus, it is rather a peculiarity of the trading instrument. Also, you should take into account that 1 pip error on binary options can cause a loss of your bet, while on e-trading you just miss a small part of your profit.
- What is a binary option and how does it differ from a traditional option?
- A traditional option is a derivative contract that gives you the right to purchase an asset at a predetermined price. A traditional option also has a limited loss but no limited profit. Just as in the case of an om, it depends on the number of points the price has passed. Since the potential gain or loss cannot be determined in advance, traditional options carry more risk than binary options.
Binary option - is one of the varieties of options, so called options "cash or nothing" (money or nothing), in this type of option not only the loss is limited, but the profit is also fixed. Which allows you to manage all the risks yourself.
- Are binary options a tool for beginners?
- Not really. Although they are certainly easier than trading currency pairs. When trading binary options, you need to determine the direction of price movement - whether it will fall or fall, and the time in which it will happen. But to earn stably, one needs to be able to analyze the market. Unfortunately not everybody understands that and when trading binary options they just play guessing game and then get upset that they don't earn. When we were developing the option accounts, we were paying a lot of attention to the possibility to make a complete technical analysis, so the traders would make informed decisions, instead of just pressing the buy/sell button. So instead of creating a separate web terminal for options, we integrated them into Metatrader 4, which allowed us to keep all the analytical functionality - all kinds of charts, expert advisors, history of deals, quotes, etc.
- How many traders at GrandCapital have switched to binary options trading?
- There are not many who have completely switched. But there are many who have added this instrument to their portfolio. First, it is a profitable tool - if the forecast is correct, the trader gets up to 86% of profit on ordinary options and, in fact, this value is not limited when using complex options. More binary options are used to hedge risks. Here is an example: the pair eur/usd jumped up by 10 points, and the trader is afraid that there will be a fall, in which case he can hedge his risks and put a sell option on eur/usd. This way, if the price goes down, he will gain profit on the option. If the price goes up, then a significant movement of the eur/usd price will compensate for the loss on the option.
- Are you the first company to integrate binary options into Metatrader 4? Tell us about the peculiarities of trading binary options via MT4 in your company.
- The idea to integrate options into the MT4 terminal appeared long ago. Mostly it was stopped by the lack of understanding of the principles of options. But in 2010 I had to work closely with an American broker who already had this service. Then we got the understanding of how it works. Then we got specialists with great experience in options trading. Then the work on options trading in MT4 started. During the long work on the project we came up with many interesting ideas, which we implemented immediately. And in 2013 the binary options service was fully ready and launched for the company's clients.
As a special feature, I would like to point out that we have introduced the possibility of expiration time setting contracts to the nearest second. This parameter is especially relevant when important news are released, when market movements are expected. For example, if the NonFarmpayrolls news is released in 11 minutes and 47 seconds, you can set the contract expiration time to exactly 11 minutes and 47 seconds.
We also introduced the two most common types of options - American options (with early closing) and European options (without early closing). Now we are thinking about adding Asian or Chinese options. We have also developed several types of options: simple options, breakout options, 2-touch options.
Not so long ago at some brokers, binary options in MT4 began to appear. And it is quite interesting for me to observe the counterparts of the service, in the creation of which I personally have put a lot of effort. It is immediately obvious to see all the details, because a lot of time has been spent on polishing our product, and I know all the nuances and problems that companies face when they try to repeat what we have done.
- What are Grand Capital's plans for the future?
- Now we are introducing VIP accounts for options. In the near future we will definitely introduce binary options on LAMM accounts, so that the clients will have a great opportunity to copy trades of successful traders. Also we are planning to introduce quotations for the "weekend" as the traders are upset that there is no trading with binary options on weekends. In the near future futures and indices will be introduced into options trading. And we also plan to increase the rewards on options. This is what concerns the immediate plans, but I will not reveal all the secrets yet.
