Trading: Binary Options are SCAM
We’ll be discussing binary options, and why you shouldn’t trade in these.
Everyone should have seen it and I bet you did too, an ad on social media and on many websites showing a nice and attractive chart with 2 buttons, a green one to ‘call ‘and a red one to ‘put’. Hitting those two buttons is called trading in binary options. If you don’t know what these are, you can read the definition below. Otherwise, feel free to skip it.
What are binary options?
Binary options are one among the derivatives available in the market like CFD’s, Futures and Options. Using binary options you can trade in anything because you’re not really buying those but just speculating the price direction. You do that using the easiest way possible, you just need to answer the following question “will the price go up?”, if yes then you hit the green button otherwise the red one. That’s why it’s called ‘binary’, cause you can only perform 2 actions.
Let’s explain the picture more: we have our two buttons which we’ve explained, above that you can specify the expiration time(presented by the red line on the chart) and the size of your trade and see the profit percentage. So if you trade using 5 dollars with the profit set to 84% and if you answer the question correctly, you get 9.2$ otherwise you lose all your money. The white bar shows the time up to which you can rebuy options.
So trading in binary options is not a hard thing to do, it’s actually so simple, that’s why people who don’t know how to trade and new traders are attracted to it.
Why Binary Options are scam?
To know if a broker is scamming people or not, we need to ask a question first “How does the broker makes money?”.
Trading in binary options has a risk-reward ratio > 1 which means obviously the risk is greater than the reward. As we mentioned before, if you get to answer the question correctly you get a specific profit percentage, but this percentage is always less than 100% and it depends on what you trading: stocks, forex… In the other hand if you get it wrong, you lose all your money which is 100%. So in this case the broker will win whether you win or lose but if you lose, he gets more. So does he want you to win?
Also, the profit percentage is fixed by the broker and the trader has no control over it at all, that’s another shady problem. There is more, usually a good trader will analyze the chart so he can take a better decision, but there is the red line which sets the deadline to close the trade, which if you choose to make it longer, the profit percentage will usually decrease. Which means the trader doesn’t really have the needed time to run analytics.
Let’s go further
As far as I know, most binary options brokers, if not all of them, are not ECN brokers but they are Market Makers. Which means they can apply another price to the stock or whatever, different from the real price in the market.
Some Quick Math
Let’s say you’re going to perform 100 trading operations, each operation costs 10$ and the profit percentage is set to 70%. The percentage of you winning is 50% and it’s the same if you lose.
So you won 50 of the operations and got 350$ profit but you lost the other 50 and you lost 500$, which means you lose exactly 150$.
Ok, let’s say you are way smarter and can win. In this case you need to increase the wining percentage to 60%, so we have:
First, it’s so hard to reach that percentage(if not impossible), especially with the previous problems which we talked about, like the time to close the trade etc.. And second, the profit still isn’t good and I don’t think it’s worth it. 20$ represents only 2% of the money you put in the beginning(10$*100).
So why all people talking about it and saying they made a ton of money from it?
Simply because they get payed to do that. Brokers like IQ Options pays up to 70% of the revenue they make from a client to the person who brought that client through an affiliate program. So don’t believe these assholes please!
That’s it, I hope now you understand why it’s dangerous to trade in binary options and if you still have questions or you don’t agree with me, just leave a comment. Thanks for following along 😄
