Financial Spread Betting And Binary

Many investors have heard of financial spread betting which is very popular in countries such as the United Kingdom and Australia. Another method of this trading which is also becoming more popular is binary betting also known as binary options. While the two are similar, they are also very different. One holds quite an amount of risk whereas the other does not.

Since financial spread betting makes use of margined trading as well as leverage there is a much greater chance for severe capital loss; this is one of the reasons that successful traders are the ones that have developed their own winning strategies. Binary betting does not make use of leverage or margined trading, which actually lowers the risk and does not require the trader to hold a margin account.

The down side to the binary betting system is that it does not allow for unlimited earning potential as does financial spread betting, which some feel is a disadvantage. Nonetheless, you may also want to consider that although it offers limited profit potential it also has limited risk factors, whereas spread betting can lead to detrimental capital loss as well as huge gains.

To go into a bit more detail on the differences of the two; when one is opening positions with financial spread betting they are in actuality betting on the underlying assets' price movements and because of this will not know what their maximum profit will be, or what their maximum loss may be. With binary betting the investor actually will be betting on the odds that the actual market will close lower or higher than the day prior, and not on the underlying asset market movements. This price will be anywhere from 0 to 100, never more and never less.

A couple of prominent areas in which the two are similar are they are both tax free (at the time of this article publication) within the United Kingdom and both financial spread betting and binary betting can place bets by going long or by going short.

Although it seems that binary betting or binary options have minimal risks, like any investment there is always risk involved. When opening your binary account, you should never lose more that what was disclosed at that time. This is where it can be advantageous to the beginner, as they will be aware of what their loss will be, and this will allow them to learn more about binary betting as well as spread betting.