There’s a lot of talk about binary options these days. However most of the time binary options are presented as the answer to all of your financial problems. In reality, nothing can be farther from the truth.
In this article I’ll look into the real aspect of binary options in order to reveal the truth behind them.
How do binary options work?
In binary trading you will have to “invest” in the future movement of certain assets such as gold, stocks, markets, etc. More concretely, you will have to predict if the value of such assets will increase or decrease during a certain time frame.
If your prediction will become true, then in exchange, you will win and earn a commission on your investment. If your prediction will not come true, you will lose all the money you have invested in making this prediction.
Presented this way it becomes obvious that binary options resemble more to sports betting rather than real investing. Binary options seem nothing more than betting on financial assets, much like you would be betting on the outcome of a sports game.
So, is it a scam?
It’s not really a scam, as the majority of companies that offer binary options are legit businesses. As legit brokers, your money will not be stolen and you won’t be defrauded. The problem is that at this moment the majority of brokers promise unrealistic winning expectations to their traders. As you can see on the list of binary options companies advertised on this site, most of them claim to offer way too large payouts.
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 most likely exist but they are the exception and not the rule. The same way that in sports betting a few handful of people manage to win extremely large sums form now and then, in binary options trading some traders will also be able to make bank. However, this happens extremely rarely.
Not knowing this, a lot of people sign up at binary options brokers that offer unrealistic winning opportunities. In the end, the people end up losing all of the money that they trade with since they approach the whole thing wrong.
But can you really win?
Like said, it mostly depends on luck but generally yes, you can really win. The thing brokers will however not tell you is that you will have to put in a lot of effort and research if you want to consistently win.
Like in sports betting, if you want to win you will have to have a great knowledge about the sport at hand and about the teams that are playing. You will have to understand the game, the teams and the players inside out. You will have to know about the historical performance, their fitness, injuries and other aspects that might influence a game’s result.
If you factor in all these variables then you will most certainly win in the long run. It’s exactly the same in binary options trading. There’s a plethora of variables and risks that you will have to consider in order to accurately predict the future development of an asset.
Issues such as time of the year, state of the economy, recent 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 he movement of an asset you will have to be up to date with all of these 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.
So, as you see, binary options is much more than just investing $100 on gold and than getting $300 back 10 minutes later. If this is your approach, then you will 100% lose.
But all this seems to require a huge effort!
Indeed. That’s exactly what it requires. I know most brokers and websites advertising binary options make a lot of bold promises but in reality it’s much more complicated than that. In order to really make money you will have to invest significant amounts of time into research and into learning the technical aspects of this business.
No matter what anyone promises you will never be able to just make easy money by placing some random bets here and there. Brokers count on you doing exactly this because they know that this way in the long run, you will be the one paying the price of becoming a losing trader (meaning brokers will be making money off of you).
So, this is the truth behind going into the binary option business. I believe there’s not necessarily anything inherently wrong with this form of online trading (or better said betting) except that at this moment they are artificially hyped up and are dishonestly being presented as something they aren’t. It is always best to get some regulatory advice from someone knowledgeable about the trade before going into it.
2016 Update: The Changes So Far
When we last talked about the inherent truths of binary options trading, it became clear that this is a genuine form of trading, except that unique effort is required to make consistent wins over the long run. But that was back in 2014; and things have changed quite a bit since then.
As mentioned earlier, there is still no easy shortcut to binary options trading success – you will still need to invest time to learn the basics of this form of trading to truly make it a way of living. That said, some developments have come in the industry that might make it easier for you to make a living through binary options trading over the last two years or so.
More Welcoming To New Traders
For one, social trading has finally become a major aspect of binary options trading. This holds some hope for newbies who would like to start making money without having to undergo a protracted learning curve. 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 also a risk that the trader you choose to follow is not going to make it over the long run, in which case you risk losing money over time. So, you will have to choose your signal providers very carefully to avoid disappointments.
Then there is also the issue of binary options robots. Unfortunately, many of these bots are scams, which is why you would be better off avoiding them altogether unless in cases where the broker is offering their own auto trading services.
But even then, you cannot really count on such brokers giving you a very profitable automated trading tool. 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 As Well
There have been advances in other areas of the industry as well. For instance, it is now easier to get access to the financial information you need to make your trading decisions than it was two years ago. Premium binary option brokers now have great platforms that give you a chance to do comprehensive technical analysis on the assets you are trading, which means you can now make better trading decisions.
Additionally, there have been cases of brokers introducing robots that scour financial news wires and give you all the recent financial news so that you can understand and even anticipate what is going to happen in the markets. All these advancements should surely make trading binary options for a living much easier.
Yes, the binary options is still legit; and growing. But you will still have to jump through lots of hoops to make it in the industry as a beginner. Lots of scams have come up of late to take advantage of people entering the industry for the first time. But at the same time, we now have a broader selection of reliable and legit brokers and signal providers than was the case a few years ago.
Furthermore, with technological innovations allowing the use of technical and fundamental analysis in binary options trading, the sector should be a lot more lucrative in this day and age. It is just that today, 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. Otherwise, you can make a good living trading binary options, even without much trading experience.