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Binary Options Trading is Not a Scam
Scam: a fraudulent or deceptive act or operation.
The Basics of Binary Options
When you trade binary options, you are essentially betting on whether the value of the underlying security will be above or below a predetermined price (the strike price) when the option expires. If you believe the value will go above the strike price, you purchase a call option, and if you believe the value will go below the strike price, you purchase a put option. Therefore, there are only two possible results:
- You were correct in your prediction! You receive a set amount of cash, or a fixed amount of the asset.
- You were wrong. You essentially lose the money used to purchase the option.
Binary options are sometimes called “all-or-nothing” options because you either receive the entire payoff or nothing at all. The positive aspect to this system is that you can only lose the fixed amount that you spent purchasing the option. However, people that are not familiar with binary options can easily lose all the money that they’ve invested, if none of the trades go in their favor.
Why Do People Think This is a Scam?
There are three main reasons people call binary options trade a scam:
- Many people try it without understanding the operating principles, so they feel cheated when trades don’t go in their favor.
- People don’t like to be wrong or lose money. They would rather blame a company instead of acknowledge their mistakes.
- They were actually scammed.
I want to be very clear: there are plenty of real scam sites to be wary of. But a large amount of the “scam” accusations relating to binary options trading have nothing to do with a scam.
By making a riskier investment with your money, you are allowing for the potential of higher returns. This is the reason why people with a poor credit history pay higher interest rates on loans. If you’re happy receiving a lower rate of return, there are plenty of low risk investments available, such as Treasury bonds.
Scams occur in almost every industry, but are much more frequent amongst financial companies. Many people don’t understand exactly how financial products work, and are willing to trust any broker that promises massive potential returns.
When it comes to trading binary options, here are some handy ways to differentiate the scammers from actual brokers:
- Understand how binary options work. No matter what the circumstance, you should never invest in areas that you don’t understand. You will almost always lose money.
- Talk to people. Call up the customer service line and ask some questions about the platform, binary options trading, and the stock market as a whole. Take down that person’s full name and direct phone number, and call them a few days later. [Don’t use the Live Chat; try to speak with an actual person]
- Check the address. Find out where the company is based, and if the country has poor regulatory infrastructure, try somewhere else.
- Look at the Press page of the company’s website. If they have received press from reputable news organizations, they’re unlikely to be a scam. But make sure to actually read the article on the website of the news organization! If you can’t find the article, call customer service and ask for a link; simply having a Bloomberg logo on their press page means nothing.
Be Smart With Your Money
You worked hard to make your money; don’t blow it recklessly.
- If the service seems untrustworthy, but you want to try it, open an account with the minimum balance possible.
- Never spend all your money on one or two trades. Any person that advises against diversification is not on your team.
- It’s fine to take general investment advice. But don’t let people tell you exactly what trades to make, or how much money to put on a trade.
- If you don’t entirely understand what you’re buying, don’t buy it!
Real World Examples
This website looks legitimate on the surface. However, there are several red flags once you dig into the details. Firstly, they are based in Cyprus, a country with questionable regulatory practices. Secondly, if you go to their press page, you will see the logos of Reuters, Banking Technology and Yahoo Finance. But you can’t find a single article on these companies’ websites that mentions TradersRoom. Thirdly, I couldn’t get a representative on the phone. The one woman that spoke to me over LiveChat immediately signed out when I asked for the link to any article by Reuters.
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This company is also based in Cyprus, but their parent company, Win Global Markets, is publicly traded and based in the U.S. Additionally, I was able to speak with representatives on the phone. The people weren’t particularly knowledgeable, but they were willing to give their personal information (which could be confirmed through LinkedIn). And though there are several complaints online about people being unable to withdraw their money, but the issue was eventually resolved, or an EZTrader manager directly responded to the posting.
Banc de Binary
A negative sign is that the quotes on their press page seem to be from their own press releases. On the other hand, their World Finance Awards can be confirmed as legitimate. In addition, Banc De Binary’s CEO will directly respond to any queries that you send him. Finally, Banc De Binary is affiliated with legitimate businesses, such as the Mattison PR agency.
[Update April 23, 2020: Nadex is currently the only binary options trading firm registered with the CFTC. There is a $100 minimum initial deposit and no fees to open an account. In addition, they provide the option to learn the basics with $25,000 in virtual money.]
Is Binary Options a Scam or Not?
Is binary options a scam or not? That is the question. Now for the answer. What I’m about to tell you is my honest assessment of the value of binary options trading. But first, for those who don’t know, let’s define exactly what binary options are. Once we’ve done that, we will then assess their worth in comparison with traditional options trading (sometimes called “vanilla options”). We will do this based on a “return on risk” principle.
Finally, we’ll draw some conclusions based on our observations and in the light of other ways of risking capital for a return.
What are Binary Options?
Binary options have three main elements:-
1. You need to predict a future outcome to be realized within a specified time period – anywhere from 1 minute up to more than a week away.
2. During the period before expiration, no adjustments can be made, nor can the options be sold early for a profit or stop loss. Profits or losses can only be realized at the time of expiration. They are also absolute and final.
3. If the outcome is realized, you receive a profit on what you risked – usually about 70 percent. If the outcome is NOT realized, you lose most of, if not all, your invested capital on that trade.
In summary, the reason why they are called “Binary Options” is because the results can only be a win or a lose. This is final and absolute. There is nothing in between. Hence the term “binary” (meaning “twofold”).
Binary options can be traded over a range of commodities, indices and currencies. Currency pairs (forex) seems to be the most popular, as they trade 24 hours, 5 days per week and are very liquid.
Is Binary Options a Scam?
The answer to this question is really one of perception. If you’re one of those people who can consistently pick winning outcomes and can do with for an overall profit, or have a proven binary options trading system that does this, then I’m sure you will be waving the flag for binaries.
But let’s run a few numbers. We’ll assume a generous profit of 75 percent for wins and 100 percent loss for losing trades.We’ll also start with $1,000 capital and each trade will risk $100.
On a given day, you place 5 trades on anticipated outcomes for currency pairs within a 5 minute expiration period. Your first 3 trades are losing ones – you’re now down to $700 capital. Then your next 2 trades win and at 75% profit, you make $75 on each. So you’re down $300 to begin with, then up $150 – an overall loss of $150.
Let’s say that you’re better at picking winners and you win 3 and lose 2 trades. You’ll be up by $225 ($75 x 3) to begin with and you’ll be very happy at your new account balance of $1225. Then you’ll lose the last 2 trades and be down $200. So your ending balance for the day is $1025 – a profit of just $25, for risking a total $500, in 5 x $100 trades.
If you’re really good and win 3 out of 4 trades (or 75% win rate), you’ll make $225 on the wins and lose $100 . a net result of $125 profit.
How confident are you, that you can achieve an 75 percent success rate, bearing in mind that you can’t close out a position if it temporarily goes into profit – you have to wait until expiration for the result?
The service offered after clicking the image below, offers Binary Signals via text message and boasts 72.5% accuracy. Combine this with the above strategy and enjoy the profits.
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Looking at it Another Way
You could say that trading binary options where the profit is 70 percent and the loss 100 percent, is like betting on the favorite in a horse race, where the win dividend is $1.70. The only difference is, that in this “race” there are only two horses – one is called “Up” and the other “Down”.
If one horse in this “two horse race” was far superior to the other, then you would feel confident of a win. That would be like saying that the odds of the currency pair being above where it presently is, in five minutes time, is very high.
Is Binary Options a Scam if you Have a System?
So here’s the thing – at 70 percent profit, can you devise a trading system whereby one winning trade will “pay” for all previous losing trades and then some?
You could employ a trading strategy whereby, after each loss, you increased your bet by an amount where the winning bet would “pay” for all previous losses and then some. But at only 70 percent profit, you would need to increase your bet by a minimum 2.35 times the previous one in order to win overall.
So now you need to decide what your first trade amount would be. For example, after 3 losing trades on a starting bet of $20, your 4th trade would be $261. But if you had started with $100 then you’d be risking $1300 on your fourth trade.
I suspect you’d be feeling a little jittery by then! If you started with only $2,500 trading capital and you lose this one, then your next trade will need to be more than your entire starting bank. If you’d started with $50,000 then you might not be so concerned . yet.
If you’re only starting off with $20 for your first trade, you then have to ask yourself whether the investment of time and patience, waiting for the right trade setup and realizing profits at 70 percent, is worth it to you.
So is binary options a scam or not? Looking at the above numbers, my conclusion is that, considering the absolute and inflexible nature of binary options in comparison to traditional options, it would not be a preferred trading instrument for me. There are so many more opportunities with traditional options.
Even if I was going to implement a money management system as described above, then I would be looking for a much higher dividend payout than $1.70 for a win. I would be better off picking the eventual winning horse in races only paying above $5.00 for a win, or a minimum $2.00 for a place and doubling my bet each time until it pays.
At least then, my chances of profiting without wiping out my entire capital would give me more losing opportunities before the winning trade saved the day. But then I’d have to be good at picking winning horses.
7 Binary Options
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The vast majority of binary options trading scams will start well before even the trader manages to open their account with the brokerage. The promotional videos are what gets many people hooked. The video about the signals or the robot (whichever they are peddling) makes things look very simple.
Here is how the scam works in a nutshell:
- A group of scammers set up a website that looks and feels like a legitimate binary options trading broker.
- The scammers then create a makeshift trading signals software and slap a 100% trading accuracy claim on to it.
- As soon as traders join the scam, they lose the initial deposit which is usually set at $250.
- After that those traders will receive a phone call from a so-called ”senior broker” who will ask them to invest $5000.
Any and all amounts deposited will disappear and you’ll never be able to withdraw them.
The Demo Trading Account
We always recommend that traders should stick with trading via a legitimate and highly regulated broker. That broker should also offer you a free demo account.
When it comes to Forex, Crypto or CFDs brokers, IQ Option is regarded as being one of the best as they are licensed in Europe. Plus, traders can signup to get a free trial of their platform.
How To Steer Clear Of Binary Options Trading Scams?
Research is your best weapon against binary options trading scams. You should research the broker properly. However, you’ll need to move beyond the majority of review sites as they just provide you with basic information.
Picking a regulated broker is a good way to safeguard your funds
The most important things you should check is:
- If the broker has a license from a financial regulator like the FSB, ASIC, FCA or the CFTC.
- Does the broker continuously call you to deposit money into the trading account?
- If the broker has a mechanism in place that protects investors from your part of the world?
- Check the history of the broker to find out if they have been fined for unethical practices by a regulator?
The next step is to shortlist and pick the best robot or trading signals system:
- You should never use a broker, robot or a trading signals software which asks that you make a deposit before ever seeing the interface.
- Never choose a trading signal if it does not fit your style or trading strategy.
- Any software that you use to create the account can also be used to place trades via the account.
- If there is a binary options forum make sure to read through the discussion there.
- Keep in mind that historical performance does not guarantee similar future results.
We know more than anyone else that binary options trading scams are very common. So, its imperative to carry out your own research and go beyond just getting excited about a $1000 bonus. Plus, for every binary options broker that you find out about, there are many others that offer the very same features and probably at a lower price.
Carry out your due diligence to find out what it is the requirement for the broker to be regarded as the best in the industry. Also, try to choose a broker that’s licensed locally and is regulated locally because that way your investment is protected.
Tired of lies ?! Binary options are evil and scam? РЎhecking the brokers for a fact of fraud
Binary options have become so widespread and a popular tool for earning that they have become overgrown with an incredible number of myths and diverse opinions. At what the opposite attitude to the instrument is observed. Let’s take a look at what binary options are-evil or an opportunity for investors, divorce or a way of earning, and also bring brokers of binary options to clean water. We will not go into complicated analyzes of technical characteristics and approaches to work with these contracts, but take information that lies on the surface. We hope that our material will be useful to you.
Lies all this ?!
Let’s start with the question of the legality and algorithm of the action of binary options. Many people say that this tool is a lie and no binary options actually exist. The adherents of this opinion are not entirely right. The fact is that binary contracts really exist and are used by investors on exchange trading floors. A striking example is the Chicago Stock Options Exchange OWN. By the way, it was this platform that created such a mode of trade for a binary contract. It became a kind of derivative of the standard vanilla option, in which for investors the list of settings was expanded and the algorithm of work was simplified. Binary options in the form offered to us by online brokers for supposedly trading, not quite an exchange contract – it’s rather a betting bet, which is used as an object of valuation or, if you want to bet, quotes of financial assets. Therefore, it is wrong to consider binary options as blatant lies! In addition, speaking about the legality of the tool, it should be noted that binary contracts, which are used as an online trading tool, are recognized as regulators of the financial market. And they are evaluated differently by these bodies, but nevertheless licenses brokers receive regularly and legally. Summing up this section, we can say that binary options are not exactly lies and deception, but rather variations on the interpretation of the concept. If you treat this type of instrument as a game mode using market liquidity indicators, then it becomes an interesting and simple method of obtaining income.
Binary options are evil and scam!
Most traders, especially those who fail in the binary options trade, call the tool a divorce and an evil! Yes, it is very easy to lose money here, but also just to make money. The reason for all the failures of investors lies in the plane of their own mistakes of traders and unprofessionalism.
Many losers can see themselves in the following example: a novice trader who has heard about the potential for earning money in a binary market, or reading an advertising article, thinks that I can earn as well – nothing complicated. The next step is to register the first broker on the site, completely thoughtlessly and unprofessionally. Then a quick study of simple instructions – such as how to work with options and terminal, crediting funds to the account! And, of course, after half an hour, thinking that he is already a professional, and can guess all the market movements such a “trader” starts trading. Another hour later, the deposit goes to the broker! And at that moment a feeling is born that you were deceived! But analyze your actions!
вЂ“ What kind of trading platform did you choose? There are many companies in the brokerage market that deceive customers with a variety of techniques and approaches, including theft of funds
With what deposit did you start. Maybe its volume is trivial enough to properly manage the risks and so you quickly merged the deposit.
вЂ“ Trade without skills and knowledge does not work! This is the truth and motto of professional traders. Only knowledge in technical analysis and other modes of market evaluation, effective strategy, extremely clear discipline of the trader in financial matters and psychological stability of the investor can lead to a good result
вЂ“ But on the basis of their unsuccessful experience of this kind, investors create an opinion about a trading instrument. Is it not easier to realize your mistakes? To become a true professional requires a lot of time and effort. To put it simply, a successful trader in his career takes such steps:
- Completely studies the technical algorithm of the contract for trading
- Gets knowledge in technical analysis of the market and forecasting issues. This includes the development and study of strategies, and the choice of the most effective way to assess the market
- Correct choice of the risk management regime
- Discipline of the investor in the issue of rules of contract execution according to the indicators of the strategy
Having tempered their excitement, and acting according to the rules and restrictions of trading, any investor will be able to get a good profit in the binary market.
Therefore, do not be unfounded to blame the reception of profit in deception, the whole reason is only in the user!
РЎhecking the brokers for a fact of fraud
We came to a more practical issue of binary trading – a deception from the binary option brokers. The problem of fraud brokerage companies today is not so pronounced – many small operators have left the market, scammers who steal customer funds, have themselves exposed investors. Large platforms have received licenses and now can not widely use tricks of deception. But still in some moments the company uses certain tricks:
вЂ“ Deriving trading positions on the financial market – in most advertising materials, brokers state that each trader’s trading position is displayed on the world market. This is an outright deception! In fact, online brokers are dealing centers that form the client base of investors playing against each other and the company itself. No one puts your contracts on the market, and they do not affect the quotes of a financial instrument, even if you use billions in trade, it will not shift the liquidity on the asset chart by one point! Therefore, treat this trading mode as a game of elimination!
вЂ“ Technical operations with quotes – there are times when traders, on the basis of predictability of the market situation, draw up a huge number of potentially profitable contracts and this can cause financial losses to the broker, which the company can not afford. The output for the company is simple – to tighten quotes at the time of expiration of the bulk of options. Believe me, they will not be stopped even by regulator supervision and fines. It’s simple, the amount of lost funds can significantly exceed the amount of sanctions. Therefore, it is more profitable to deceive traders. But such nonsense today is engaged in a very small number of companies.
вЂ“ Complex verification – you are a successful trader, and you get a good income, chose a seemingly safe trading platform, got the result and want to monetize the funds. But here there is a problem – the broker requires verification of the client and at the same time puts forward conditions that are absolutely impossible to fulfill. Such a technique is used by companies in the hope that the investor will simply surrender, refuse the deposit and the funds will remain with the company. Therefore, before you start trading on the platform, learn the verification process, so as not to get a surprise at the most interesting moment.
The result of this analysis is a simple recommendation – for trading you need to choose the most secure and trusted brokerage platform. We consider as an example of such a site resources from our TOP 3.
This trading platform for trading is the most secure, professional and client-oriented. Here, investors can work in the most comfortable mode with the use of a wide range of technical forecasting tools. In addition, the broker at all important stages of the activities of investors, including verification, offers the simplest technical modes of operation, based on interactive information techniques.
Binary options are without a doubt not a deceit and not a divorce of traders. With the correct use of the instrument in optimal financial and technical conditions on a professional platform, it is guaranteed to bring profit, and in a stable mode!
вЂњGeneral Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.вЂќ
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