Fixed-term Contracts, Who Uses Them And Why?
Ever wonder why people use contracts with fixed expirations – binary options? There are many types of participants drawn to the financial market. This includes traders, trading platforms, various other kinds of spectators, and even gamblers.
- 1. What is the point of making financial speculations through fixed-term contracts?
- 2. Which is better?
- 3. The benefit of fixed-term contracts is the low financial entrance threshold
- 4. Another benefit you can generate profit quickly
- 5. Why do “gamblers” need trading?
- 6. Why do I need a trading platforms?
- 7. Reviews
And, of course, it is important to keep in mind that fixed-term trades are a serious market tool used internationally on platforms. Every market participant has their own goals and methods of analysis that enable them to answer the completely rhetorical question.
What is the point of making financial speculations through fixed-term contracts?
In the late 70s the Forex currency market was created for everyday investors, giving them the opportunity to invest funds and conduct operations with currencies. These days, there are $5.1 Trillion dollars live on Forex each day and, according to even the most conservative calculations of experts, by 2020 this turnaround will rise to $10 Trillion a day.
The Forex market became accessible to the general public in the 2000s and investors gained the opportunity to generate profit online. Russian-based internet platforms only begun appearing since 2011, offering various new types of contracts as tools for trading with expirations fixed in advance. This then begs the question, why? What is the point of new tools when there already are tried and true options. To answer the question of why traders choose this type of contract, it is important to compare the processes of generating profit on Forex and on the exchange.
Which is better?
So, what happens on Forex when a trader wants to earn profit? Say there is a certain currency pair that is increasing in value in comparison to another. If a trader can forecast the change in asset price, they buy a lot. The main drawback of Forex is the financial barrier to entry. The minimum lot costs $10,000 dollars, if we are talking about a trading operation on that specific currency. Obviously, investing such an amount is an extremely high risk.
Of course, you don’t need to invest thousands of dollars in a contract, as brokers offer so-called leverage. Meaning that the investor isn’t trading solely with their own funds, but with barrowed means. Therefore increasing the likelihood of losing capital. Despite the fact that you can gain entrance to Forex with an initial deposit of only $1-10 dollars, industry professionals recommend using a starting capital of several thousand dollars. Only then can you count on a reasonable level of profit.
In certain situations, entering the market with $10 dollars in enough. However, $200-$300 dollars of starting capital makes your trading operations more likely to generate a meaningful profit.
The benefit of fixed-term contracts is the low financial entrance threshold
Now let’s talk a bit about how long you to wait before you profit from trades. On the Forex market, investors have to wait an unspecified amount of time until the price hits a certain number of points before profiting, at times it can even take years. It is easier with fixed-term trading, as the time range is set, ranging from 60 seconds to several days.
Another benefit you can generate profit quickly
The most attractive advantage of fixed-term positions is that there are no commissions, swaps, profit levels or stop losses. And, of course, it is the easiest method of working on the market. Newcomers to trading can quickly catch on. Let us just warn you, be careful not to mix up fixed-term contracts with classic trading tools. They aren’t the same thing, even though the approaches and forms of market analysis are the same.
The answer to our earlier rhetorical question is completely common sense. Fixed-term contracts provide online investors with a number of undisputed advantages and offer the simplest approach to working with financial assets. Many strive to generate a quick profit, others aren’t comfortable risking large sums. The third option, not available with Forex, is taking advantage of fixed-term trading positions, as they have fast become a lucrative alternative.
Why do “gamblers” need trading?
Without a doubt, if you ignore market analysis and approach trading like gambling, than trading on the market with fixed-term contracts could be compared to placing bets. You’d get a rush of adrenaline, and it would come along with a certain profitability and risk level. Many “gamblers” just guess which positions to open due to their lack of knowledge. In such cases, the likelihood of profit is always 50/50. You can only call such an approach gambling.
We of course can’t prevent you from gambling on the market, but think about it, only taking a few minutes to consult a number of analytical tools can make all the difference. Moreover, the profit you were seeing as just a nice bonus accumulates, becoming a stable stream.
So, average investors need fixed-term contracts to gain access to the financial market with minimal funds. Now, let’s take an in-depth look into another important matter.
Why do I need a trading platforms?
This is a question that every new market participant asks themselves. Why do I need a middle man when there are international platforms without any fraud risk whose transparency is monitored by hundred of organizations. This is a list of all the primary problems with accessing real exchange platforms:
- Both the CBOE (cboe.com) and the Cantor Exchange (cantorexchange.com) platforms for trading options are only open to clients from the US
- The initial capital required is just sky-high for the average investor, starting from $10,000 dollars
- They take a direct approach to trading at such platforms, trades are not placed on price difference. Therefore, the entire process is significantly more complicated
Moreover, even if investors have the kind of money required, the real exchange platforms aren’t accessible from CIS countries. You could settle for whatever your national exchange platform is, but they would only provide basic contracts electronically.
Hence, the question of partnering with a “middle man” is less of a question and more of a technical necessity. Another rhetorical question, then why even take this approach to trading, if a platform can just bail on you? Do you really get your earnings? Our answer to that being, even if the company doesn’t display a market contract, that doesn’t necessarily mean that they are fraudulent. Your first focus should be on finding the right trading partner. For example, Binomo is one of the market leaders. A professional platform will always be transparent with their clients and offer the best, most lucrative trading conditions financially, as well as technically.
On that note, unfortunately, we should conclude. The aim of our article was to explain the aspects of fixed-term trading that are often forgotten or left out, especially in advertisements that promote it as a miracle tool. We hope that this article will come into use for you.