Betting has long been a big part of the UK culture, with its popularity surpassing that of many other common pastimes in the nation. It’s thus no wonder that binary trading, effectively a form of financial betting, has become widespread in the UK.
Anyone with a bit of knowledge of economics and sufficient love for gambling and making predictions can find binary options trading interesting.
In this piece, we wanted to take a closer look at this practice, its popularity, legality, and most notably, its future. But let’s first explain in simple terms what binary trading is.
What Is Binary Options Trading?
Binary options trading is much simpler than it sounds. Binary options are derivatives that are traded on any market or asset. These can be stock prices, foreign exchange rates, commodity values, indices, and even cryptocurrencies like Bitcoin and Ethereum.
It might sound that binary options trading is like regular stockbroker trading. However, you are well aware of both the risk and the reward with binaries before making the trade. This important distinction is also one of the main reasons why the practice is very akin to betting.
There is no need to make any prior calculations, as you’ll know exactly how much you are risking and what the exact potential returns are.
With that in mind, the only thing you need to do here is to make the prediction — will the value of a specific asset rise or fall. You do not need to worry about the exact new price; you only need to determine if it will be higher or lower than the current price. In other words, this is a yes or no proposition.
Popularity of Binary Options Trading
The previously explained simplicity is one of the main reasons for the rising popularity of binary options trading. The practise began in the US but is now a lot more popular in Europe and the UK.
Anyone can effectively get into binary trading, at least through a verified and trustworthy broker. We’ll explain that later on, but for now, you should know that the yes/no proposition of binaries is what has driven their popularity in the UK.
What’s more, for anyone interested in stocks and other forms of trading in the world of finance, binary options can often be the easiest route to take. You only need to follow the current events to make better predictions and, of course, have some knowledge of economics.
In the end, one of the main reasons binary options gained a lot of popularity in the UK in recent years is that the risk is very clear-cut. The amount you want to trade is the amount you are risking, and that’s all. If your prediction is correct, you’ll usually win between 75% to 95% more, and if your prediction is wrong, you’ll lose the invested amount.
Laws and Regulations on Binary Options Trading
Binary trading in the UK is legal and fully regulated. However, binaries are not classified as financial derivatives as they likely should be. Instead, they are classified as fixed odds bets. This means the whole practice is regulated by the UK Gambling Commission.
This can be somewhat of a problem for UK citizens interested in trading binaries. Binary trading requires a form of a contract, and gaming contracts are not legally enforceable under UK law, making binary trading problematic if you cannot trust the broker.
Fortunately, UK citizens can freely sign up with brokers and brokerage firms from the EU. For instance, Cyprus is a significant hub for binary options trading brokers.
Binaries are classified as financial derivatives, and binary options trading and brokers are regulated by the Cyprus Securities Exchange Commission (CySEC). This makes the practice entirely safe for UK citizens.
If you still want to get a broker in the UK, it’s possible, but you must check them thoroughly. If they are regulated by the Financial Conduct Authority (FCA), it’s a bonus that further proves their reliability.
Future of Binary Options Trading in the UK
The future of the practice is quite bright in the UK. Despite the seeming regulatory peculiarity, binaries keep gaining in popularity, and there are talks that the UK might change some of its regulations in the future and finally classify them as financial derivatives.
For now, it’s a safe practice for anyone interested, as long as they ensure that the broker they are dealing with is reliable.