Learning how to trade the financial markets including some of the world's major indices like the Dow Jones, FTSE100, S&P500 and Dax and Forex markets such as the British Pound and US Dollar can to a newbie seem somewhat daunting and above all, risky.

The main reason for this is due to the popularity of products such as spread betting and futures which offer at least on paper the potential for huge returns. However in reality they are totally inappropriate for a new trader. If these products were cars for example and you were a new driver, it would be like you having to drive a high performance sports car immediately after your test. Although on paper it may be hugely enjoyable the risks of you losing control and crashing would be very high indeed. Likewise in trading, futures and spread betting are highly leveraged products which expose you in theory to an unlimited loss.

Of course there are stops that you can deploy to avoid disaster but even these can be vulnerable in highly volatile markets.

So what is suitable for a new trader?

Well simply there are some excellent products available under the names of Binary Trading (Binary bets - Binary options) and Financial Fixed Odds. These products have become more popular in recent years and really are an excellent choice for new traders and even those more experienced.

The reason why they are such an excellent choice is very simple. These products deal with a fixed amount won or lost which is known from the outset. This simply means that you will know from the start of your trade the absolute maximum you will lose if things go against you and the amount you will win.

These means protecting your account becomes much easier.

Here's how binary trading is the safer, better option:

Let's say you wish to day trade and you think that the market on this day is going to rise overall.

You open a binary bet / binary option and are quoted a price of 48 for the Wall Street (Dow Jones) market to close higher for that day, for example. You decide to risk $10 per point. Binary bets work on a price of 0 - 100 which means that if you win, you will earn 52 x $10 i.e. ?520. This figure is the 100 points - 48 (cost of the bet) x the amount of your stake, (being ?5).

Now let's instead say we opened a spread bet or futures trade and the market stands at 10200 and again you choose to risk $10 per point, expecting the market to rise. For every point the market moves up you gain $10 and for every point the market moves down you lose $10. Let's also say you place a stop at 10000, just in case the market should move down, against you.

With the binary bet you need not care how far the market moves one way or another. All you need is for the market to close higher by the end of the day to win.

With the binary bet you know your maximum win being 52 x $10 = $520 and your maximum loss is 48 x $10 = $480.

The spread bet is a different story; your whole level of profit or loss is totally dependent on how far the market moves during the day. If the market, for example, dropped in early trading and you hit your stop at 10000, that would be the end of your trade and you would have lost $2000 (i.e.: 200 point drop to your stop x $10 per point.)

Even if the market did close higher without hitting your stop first and closed at 10220 your win would still be less than the binary bet, as your win would be 20 x $10 being $200, whereas the binary bet would win $520.

So it's easy to see why Binary Trading with binary bets and binary options offer an excellent starting point for new traders.

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