You can’t read an investment blog without coming across posts about binary options. There’s a lot of money in binary options – for users, brokers, and advertisers – so this won’t change overnight. Binary options trading is legitimate, but incredibly risky. You’ve got to understand the the industry and the risks involved – and you might be better served staying away entirely.
Don’t believe reviewers who pitch binary options as a quick fix for your financial problems. In reality, nothing can be farther from the truth.
How does Binary Options Trading work?
Binary options traders “invest” in the future movement of certain assets, such as gold, stocks, markets, etc. Simply put, binary traders try to predict whether the value of such assets will increase or decrease during a certain time frame.
If your prediction comes true, you will win and earn a commission on your investment. If the value doesn’t change as you predicted, you will lose all the money invested to lock in your prediction.
Presented this way it becomes obvious that binary options trading is more like sports betting than real investing. Binary options is nothing more than betting on financial assets, much like you would bet on the outcome of a sports game.
So, is it a scam?
This doesn’t make binary options a scam. It’s just not an investment.
The majority of binary options brokers are legit businesses. As legitimate brokerage houses, your money will not be stolen and you won’t be defrauded.
The problem is that the majority of brokers promise unrealistic expectations. The average user does not get results like these.
The most common way binary brokers attract new traders is to show them cases where simple people managed to win huge amounts of money by just trading low amounts on gold and other popular assets.
Sure, cases like that do exist, but they are the exception not the rule. The same way some sports gamblers manage to win extremely large sums, skilled/lucky binary options traders occasionally make bank. However, this happens extremely rarely.
Not knowing this, a lot of people sign up with binary options brokers that offer unrealistic winning promises. In the end, lots of people end up losing all of the money they put into the system.
But can you really win?
The biggest factor in winning at binary options is LUCK. But yes, you can really win.
The thing brokers will not tell you is that you will have to put in a lot of effort and research if you want to win consistently. And even then, luck is the most powerful variable.
Like in sports betting, if you want to win you will have to have a great knowledge about the sport in question and about the teams that are playing. You will have to understand the game, the strengths and weaknesses of the teams, and the skills of the players. You will have to know about historical performance, fitness levels, injuries, and dozens of other variables. Even then, things might not go your way.
If you factor in all these variables then you probably will win in the long run. It’s exactly the same in binary options trading. There are countless variables and risks that you will have to consider in order to accurately predict the future development of an asset.
Issues like time of the year, state of the economy, political developments, economic performance of key market makers, recent business news and events are constantly influencing the movement of stock prices and commodities.
In order to be able to accurately predict the movement of an asset, you will have to be up to date with all of this info. Also, in order to be successful you will have to understand a variety of technical data as well, such as being able to read charts, use technical indicators, understand statistic calculations, and much more.
As you can see, binary options is much more than just investing $100 on gold and then getting $300 back 10 minutes later. If this is your approach, then you will lose 100% of your investment sooner than later.
But that sounds hard!
Yes indeed! That’s exactly what solid binary trading requires. I know most entities advertising binary options make a lot of bold promises, but in reality it’s much more complicated. In order to really make money you will have to invest significant amounts of time in market research and learning about the technical aspects of this business.
No matter what anyone promises, you will never be able to make easy money by placing random bets here and there. Brokers count on you doing exactly this because they know that this way, you will be paying the price of becoming a losing trader (meaning brokers will be making money off of you).
So, this is the truth behind the binary option business. There isn’t anything inherently wrong with this form of online trading (or, better said, betting), except that brokers are artificially hyped up and are dishonestly presented as something they’re not.
So one more time, is Binary Options Trading a Scam?
Binary Options trading isn’t a scam, but it’s financial gambling that will only work well in the long term for the most devoted and knowledgeable users.
2017 Update: Binary Options Industry Changes
If you read our thoughts from 2014, you know that binary options is legit, but extremely risky and difficult to take part in profitably. But that was back in 2014. Things have changed quite a bit since then.
As mentioned above, there is still no easy shortcut to binary options trading success – you will still need to learn the basics of this trading form and do lots of market research to make real money. That said, some new developments have appeared in the industry which might make it easier for you to make a living through binary options trading.
More Welcoming To New Traders
For one, social trading has finally become a major aspect of binary options trading. Newbies who would like to start making money without having to fight against a gnarly learning curve can look to the practices of seasoned veterans. Some brokers even offer in-house social trading platforms that let you profit from the trading experience of highly successful binary option traders within the company.
Of course, there is the risk that the trader is going to fail, in which case you risk losing money just the same. So, you will have to choose your signal providers very carefully to avoid disappointment.
We now have binary options robots as well, which purport to automate winning trades for users. Unfortunately, many of these bots are scams, which is why you would be better off avoiding them altogether (unless in cases where your broker is offering their own auto trading services).
Even then, you cannot really count on a broker to give you a highly profitable automated trading tool. Why would a broker give you the tools to take their money? You will have to do your own research first to see if the auto trading system is worth its salt. And should you choose to use an independent binary trading robot company, you will have to be extra vigilant to avoid getting scammed.
More Tools For Advanced Traders
It is easier to access quality financial information needed to make intelligent trading decisions than it was two years ago. Premium binary option brokers now have great platforms that provide excellent data for comprehensive technical analysis on the assets you are trading, helping you to make better trades.
Additionally, there have been cases of brokers introducing robots that scour financial newswires, giving you the latest events so you can anticipate market fluctuations. All these advancements make binary options trading easier (for people willing to put in the time to learn the system inside and out).
Yes, binary options is legit, and growing. But you will still have to jump through lots of hoops to make it in the industry as a beginner. There are also plenty of scams to take advantage of helpless new binary options traders who don’t know how the industry works. At the same time, we now have a broader selection of trustworthy brokers and signal providers than we had a few years ago. One in particular that we recommend is 24Option.
Furthermore, better information and technical analysis makes the industry more lucrative for dedicated users. Even so, you will have to be a lot more watchful of who you get into bed with when entering the industry to keep your money from falling into the wrong hands. If you are willing to put in the work, learn through trial and error, and develop better methods than the average binary options trader, you can actually make money with binary options in 2017.
Recent Posts from Modest Money
- Gaia, Inc. (GAIA) Stock Is Keeping It Peacefully Real
- The Most Secure Coin in the World
- Are Airline Stocks Ready To Take Off?
- A Forex Beginner's Guide
- Cancer Genetics, Inc. (CGIX): Don’t Fight the Tape, Stock Going Higher