Are binary options a scam or not? – The truth about it
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Binary options have attracted all manner and levels of traders with varying degrees of experience, from novices to pros, who are looking to diversify their portfolios. Over time, this form of trading has become a respected and legitimate profession. Despite this, several people are concerned about the safety of binary options trading, mainly where they invest their money.
In this post, we’ll address this frequently asked question concerning binary options trading to assist you in making an informed choice. We’ll also go over tips for picking the best binary options trading platform and the elements influencing trading risk.
What exactly is a binary option?
A binary option is a sort of options contract where the payoff is wholly dependent on the execution of a yes/no proposal, which usually refers to how much the price of a specific asset will increase above or decrease below a certain amount. Since binary options execute instantaneously after the option is purchased, the holder has no other decision to make about the execution of the binary option. Unlike most other options, a binary option does not provide the holder the ability to buy or sell the underlying asset. The option holder gets either a particular cash sum or none when the binary contract expires.
Binary options trading received widespread acceptance after experiencing exponential growth after 2008 and being reclassified as a financial instrument in 2012. During that period, the number of people searching for the word “binary options” on Google Trends overtook the number of people researching the associated term “forex trading.”
Notice:
As a result, your interpretation of safety in the query “Is binary options trading safe?” is if it is regulated and legal. Therefore the answer is yes, provided you select the correct binary options brokers (which we’ll explain shortly). If you’re wondering if it’s risk-free, you should know that all trading, not only binary options trading, contains risk. Every business, investment, and venture comes with a calculated risk because there is no guarantee of future success.
Recognizing risks and trading wisely are two of the most important aspects of trading securely. In view of that, let’s take a closer look at why binary options trading is risky in terms of its procedures, platforms, and trading tactics.
Binary options are widely seen as risk-free investments. Nonetheless, as with any financial instrument, it is advisable to conduct due diligence to ensure that you are dealing with an open source. Here are some of the key reasons why this trading channel could be one of your safest choices.
Simple and easy-to-comprehend premise
The flexibility of binary options trading is arguably one of the most appealing features for many traders. It has a basic premise: you have only two options and consequences (thus the term “binary”). You’ll choose and anticipate the asset’s price action if it is confirmed at a given moment in time, depending on your educated prediction based on many elements and trends.
A direct yes or no statement where you get a fixed percentage of your investment if you succeed and nothing if you don’t. This is why it is also known as No Assets or No Alternatives.
With binary options, traders do not have to buy or own assets. Assets may include commodities (e.g., crude oil, silver, and gold), currencies, and stock indices.
Getting started is easy too. Traders need a broker to register an online trading account and start trading immediately. Although knowledge of this type of trading is still required, it does not require as extensive knowledge as other forms of trading, such as Forex trading. Thanks to this, even beginners can choose between different types of binary options.
Notice:
There are investment options that are convenient for everyone. They can choose simple call-and-sell options, doubly disconnect binary options, vanilla options, or exotic options, among other things. Thus, traders rely on their knowledge and skill level to understand how they work and avoid blind trading. Meanwhile, experienced traders have the opportunity to opt for more complex alternatives that yield higher returns with more risk and reward.
Risk is well-known and limited
When you trade binary options, you know exactly how much you’re risking as well as how much money you could make depending on the outcome. You’re just putting your money on the line for the amount you select, no matter how trivial or important it is. Furthermore, unlike many other types, there really is no risk of leverage, which implies you will not lose more than the money you risked in the trade. As long as you select to invest an amount that is within your means, you will be prepared for probable losses. This keeps you from losing more money than you can afford to lose.
It’s also a cost-effective technique to trade online because you don’t have to exchange significant sums. You can start trading with low capital, as little as $1 up to your broker. Some even provide you with a demo account that you can use to practice and learn how to trade binary options before spending actual cash. Some best binary options forex brokers make money by allowing you to trade with as little as $5 to $10. It’s safe in the sense that you’re not compelled to lose any money straight away.
Returns that are high and quick
One of your objectives while investing is to achieve high returns. Binary options often have more enormous rewards due to their increased risk. It generates a return of roughly 60-90 percent on average, depending on your broker. Its high turnover rate ensures prompt payment. Expiry times vary by asset and might span from a few seconds to less than an hour (often even seconds) to several weeks. You can trade numerous times a day for a significantly more significant profit if you choose daily binary options traders.
This offers you access to a wide range of assets that you may trade, which is an excellent method to diversify your risks and limit the amount of risk you take at any particular time. If you’re lucky, the money will be credited to your account right away. You can also withdraw your money immediately, depending on the platform you choose. Meanwhile, some brokers provide a little return dependent on how much you spend if you’re unproductive. For example, you won’t lose all of your money, but you’ll still get back about 5-15 percent of it.
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 options trading seeks to predict whether the value of those assets will increase or decrease over time.
When your predictions come true, you receive commissions on your investments. If the value does not change as predicted, you will lose any money invested to confirm the prediction.
From this point of view, it becomes clear that binary options trading is more like sports betting than fundamental investing. Binary options are just betting on financial assets, much like betting on the outcome of sports betting.
Is it a scam, then?
This does not imply that binary options are a sham. It’s simply not a wise investment.
The large bulk of binary options brokers is trustworthy companies. Your funds will not be robbed, and you will not be cheated because they are reputable brokerage firms. The issue is that the preponderance of brokers makes money by making unachievable promises. Average users do not receive these kinds of outcomes.
The most typical method used by binary brokers to make money and entice new traders is to offer examples of how ordinary individuals have won large sums of money by trading small amounts of gold and other popular assets.
Sure, such instances occur, although they are the exception rather than the rule. Like some sports gamblers can win significant sums of money, proficient binary options traders can occasionally make money. Nevertheless, this is an infrequent occurrence.
Many customers are unaware of this and sign up with binary options brokers who make unrealistic winning guarantees. In the end, many people lose all the cash they invested in the program.
Can you indeed win?
The most crucial component in binary options success is your LUCK. However, you can indeed win. Brokers don’t tell you that if you want to win regularly, you’ll have to put in a lot of time and research. Even then, luck is the most crucial factor.
Notice:
If you’d like to profit from sports betting, you’ll need to learn everything there is to know about sports and competing players. You’ll need to know the game, the teams’ strengths and weaknesses, and the individuals’ abilities.
You’ll need to know past performances, physical fitness, injuries, and other factors. Even then, things may not go as planned.
Considering all of these factors, you will likely win in the longer term. In binary options trading, it was the same. To effectively anticipate the ongoing expansion of an investment, you must examine many variables and hazards.
The fluctuation of stock prices and commodities is continually influenced by factors such as the time of year, the status of the economy, political changes, the financial growth of key market makers, and existing business announcements.
You’ll need to be up to speed on this information to estimate an asset’s movement effectively. You will also need to comprehend a range of technical data to be successful, like how to interpret charts, utilize technical indicators, comprehend statistic calculations, and so forth.
As you’ve seen, binary options entail far more than simply investing $100 in gold and receiving $300 in 10 minutes. If you choose this technique, you will lose your money sooner rather than later.
But it doesn’t sound elementary!
Yes, for sure! This is what you need for reliable binary trading. I know most binary options brokers make money by making a lot of bold promises, but the reality is much more complicated. To really earn money with trading, you have to spend a lot of time researching the market and the technical aspects of this business.
Whatever you promise, you can never easily make money by placing random bets. The broker expects you to do so because they know they will pay you this way by being a loss trader (i.e., they know the broker will make you money).
Here is the truth behind binary options. There is nothing wrong with this kind of online trading (or, more precisely, betting), except that the broker is artificially inflated and marked as dishonest.
Again, are binary options trading scams?
Binary options trading is not a scam but an economic game that will only work for the most committed and informed consumers in the long run.
Investors’ complaints against binary options trading systems that are fraudulent
The Securities and Exchange Commission (SEC) has received multiple accusations of fraud involving websites that provide the ability to buy or trade binary options through Internet-based trading platforms. There are at least three types of complaints:
1. Failure to credit client accounts or repay consumer cash
Clients who have put money into their binary options trading account are frequently contacted by “brokers” who persuade them to deposit further monies into their wallet over the phone.
Customers claim that when they try to withdraw their initial deposit or the guaranteed return, the trading platforms invalidate their withdrawals, fail to credit their accounts or disregard their phone calls and emails.
2. Theft of one’s identity
According to these allegations, these Web-based binary options trading platforms may collect clients’ identifying data (even copies of their credit cards, passports, and driver’s licenses) for unclear purposes. Don’t give out any personal information.
3. Software manipulation to induce loss trades
These allegations claim that binary options trading companies on the web modify trading software to misrepresent binary options prices and payouts. When a client’s transaction is “winning,” for instance, the countdown to expiry is artificially prolonged until the trade becomes a loss.
Beware of excessive returns on binary options
Additionally, some online binary options trading platforms may post higher average return on investment than buyers expect from their payment structure, which may increase the average return on investment.
Good to know:
For example, a buyer can ask to pay $50 for a binary options contract that promises a 50% return if the stock price of company XYZ is above $5 per share when the option expires.
If the odds of winning are 50/50, the payout structure is designed so that the expected return on investment is negative, resulting in a net loss to the customer.
This is because an option that ends in cash (about 100% of the loss) is much larger than if the option ends in cash (about 50% of the profit).
In this example, the investor can expect to lose money on average.
Always check your professional or financial background.
Before investing, you should familiarize yourself with the background of the professional or financial company you want to do business with, including your registration or license status.
FAQ – The most asked questions about binary options scams:
What is meant by a binary options scam?
A binary options scam refers to a scam that a trader has to suffer because of signing up with an unregulated broker. These days binary options scams are gaining momentum because traders are not cautious when choosing a binary options broker. The brokers with no regulating authority overseeing their operations mostly carry out trading scams with traders.
How can a trader protect himself from binary options scams?
A trader needs to be cautious while trading binary options. To prevent any binary options scams from happening, a trader must ensure that he chooses a binary options broker that is well-regulated. The binary options broker must perform within a regulated environment, and there must be a regulating body to which it is answerable. Then, a broker would be responsible for his actions, and it would give traders the best experience of trading binary options.
How to avoid binary options scams?
With so many binary options scammers in the market, it can be challenging for a trader to pick a broker that does not make trading a hassle. However, a trader must pay attention to any suspicious reviews that he might find about the broker. Then, he must avoid trading with that broker to cut any possibilities of scams.
Last Updated on March 3, 2023 by Arkady Müller
