This article will help you understand the nature of the binary options scams going around and exactly what risks are involved within the trading space in general.
Believe me when I say there are tons of scammers misleading people about this type of trading, so it’s time to learn exactly you need to know to protect yourself.
What is Binary Option Trading?
Essentially a binary option is a trade whereby you have two possible outcomes… either lose completely or win a predetermined amount. Other forms of trade carry a more continuous type of trading outcome, for example with other trading models you can close a trade at a level of profit you are happy with at any point during the trade, whereas binary trades only win or lose completely.
There is no middle ground with binary options.
More often than not this type of trading is done on unregulated trading platforms and thus carries a large amount of additional risk as a result.
Since binary options are short term, technical trading is focussed on rather than fundamental trading (analysing economic forecasts and information to base decisions). Technical trading just means analysing the chart and looking at the numbers primarily, which is all you need to be doing with a short term trade.
Why Are Binary Options So Popular?
This type of trading is very simple, easy to understand and gives people a fixed return on investment. It also makes generating a quick profit possible even for novice traders. This coupled with readily accessible binary trading platforms has made it incredibly popular.
For people that are not familiar with trading, binary trading is akin to gambling and carries a huge amount of addiction along with it. I am not saying trading itself is gambling by any means, but for those looking to make quick and easy cash without knowing what they are doing… that is exactly what this is.
I mean who doesn’t want to make some quick and easy money right?
There is also a very low entry point into these with a broker, you can normally start trading with as little as $200 which makes trading in this way very accessible and luring.
Are People Making Money With This For Real?
There is no doubt you can make money with trading binary options, people make money trading all day every day so this is a fact.
The issue is not the legitimacy of binary options as such, but the hype and fake promises surrounding the potential for a complete newbie. A lot of scam sites are merely giving people access to ‘indicators’ which help you make binary trading decisions but in no way remove anywhere near the risk these jokers are saying they will.
No single trading software in the world can predict the future or have you making easy plug and play money with no trading knowledge.
The Risks Involved
I’ve come up with a list of six main risks associated with binary trading or trading in general, let me know if you have something to add.
#1 Trading Is Risky In General
Like any investment, trading carries a certain level of risk no matter what, learn what these are and make sure you are going into it knowing. The good thing about binary options are that you know your potential wins or loss right from the start of the trade.
#2 Most People Lose Money
I don’t mean to sound morbid about this but the fact is most people going into this kind of thing will lose money. It is highly recommended that you start trading with a free demo account before making any trades using money, especially if you have never even traded before.
#3 The ‘FREE’ Gimmick
You may already know this but the Internet is flooded with scam sites promoting how quick and easy making money with binary options is. They also give you this ‘magic software’ for free, as long as you deposit money into their recommended trading platform.
They are almost certainly an affiliate with the trading platform and will make a commission for sending you there, make no mistake about it.
They are making money out of you regardless of whether you succeed.
#4 No Software Can Predict The Future
Regardless of what you are being sold there is no single software that will predict the future and magically allow you to just plug in and start making easy cash. That simply does not exist as a lot of people, including me have found out the hard way.
Learning how to trade takes time, learning and practice… do not be fooled!
#5 The Bonus Offers Are Traps!
Much the same as gambling sites the bonus offers are a complete trap and lie, these brokers are not stupid and they are certainly not nice guys giving you a bonus.
Here’s how the bonus is bogus…
You deposit some money and accept the ‘bonus’, when you read the fine print you will come to realise that in order to withdraw ANY money out of your account you must trade 30-40 times that initial deposit and bonus. So for example if you deposit $250 and they match it with a $250 bonus, you will need to place up to $20,000 worth of trades to ever be able to withdraw!
I am seriously not kidding people, stay away from these traps.
They know that statistically you’ve either lost everything by that point or have made them their bonus money back well and truly by then… like I said they are not stupid. Make sure you read the fine print and avoid these bonuses like the plague!
#6 Unregulated Brokers
It is very important to be careful which broker you decide to trade with, some are regulated and some aren’t. If you go with an unregulated broker, you could deposit money and never hear another word. There’s a LOT of people reporting losing money right off the bat and have no luck getting a refund or withdrawing any money.
There are even reports of credit card fraud and identity theft, since a lot of them require passports, driver license, credit card info and other sensitive information as standard operating procedure.
Bottom line is to be EXTREMELY careful when choosing a broker or you will become another person losing money to a scam binary broker.
#7 The Up-Selling
Almost all of them will try and get you to deposit more and more money and even get you to buy a more ‘advanced’ trading software, this is very common and I have personally experienced this. People lose thousands of dollars this way trying to recoup their initial loss.
Why Are There So Many Binary Option Scams?
I guess the reason there are so many of these scams is that people want to make easy money, and they lack real trading knowledge, throw in a convincing sales pitch and this is how easy it can be for these guys to make money.
Clever marketing, low entry point and lack of knowledge makes this a popular scam. Not only that but these people are not even selling you anything directly which makes it even easier for them to convince you to sign up.
Binary option trading is not a scam in itself but it is saturated with jokers and dodgy brokers trying to convince you it will all be so easy and will make you rich very quickly. This is simply not the case, if it sounds too good… well you know the rest 🙂
If you want to learn how to trade binary options properly, I recommend setting yourself up with expert training and a regulated broker with good reviews from real customers.