It looks like forex binary options trading system became one of the most popular offers made to people who are looking for side hustle income. Before jumping on any of these juicy offers, you’d better search for honest reviews of binary options trading. My goal is to provide educated, fact-based review that will allow you to make the right decision
In any social media group or forum related to Internet Marketing or Working from home, you can see dozens of these posts promising quick money without any effort.
Here is just one example I immediately have found in the first Facebook group I checked: software that enables you to make a “huge profit in trading forex and binary options. 80-100% profit every week with your minimum investment of $250 you can make a profit of $2,500 in 7 days withdrawal.
Huge profit for everyone?! 80-100% weekly? Seriously? If this person knows how to double the money in one week, then in 12 weeks he would make more than a MILLION dollar from $250 investment. Would he bother trying to recruit you on Facebook?
Can you really make money from binary options trading?
Let’s start with some basics first. Later on, I’ll show you what irresistible offer I’ve got from one Facebook stranger.
What is a binary option?
Financial Definition: A binary option is a financial option in which the payoff is either some fixed monetary amount or nothing at all, dependent on the outcome of the specified event.
The Definition “for dummies”: A binary option is a bet, like flipping a coin. If it lands on heads, you win. Otherwise, you lost your bet.
Alternative definition “for dummies”: A binary option is very similar to buying a lottery ticket. If your numbers are drawn, you win. Otherwise, you can throw your ticket to the garbage and stop dreaming about that yacht.
Example from the financial world:
Event: S&P index will be higher than 2,700 on Friday 6/1/18 at 12 pm EST.
Payment: $100$ if yes, $0 if no.
The price of the option in this case always will be between $0 and $100.
If you believe that this event is going to happen, you buy the option, let’s say for $45. If S&P is higher than 2,700 at the specified time, you’ll get $100, making a profit of $55. Otherwise, you just lose $45 paid for the option.
If the probability of the “yes” and “no” outcomes are similar, the price of the option will be close to one half of the potential gain. The lower the probability of the outcome, the lower the option price will be.
It’s is very similar to lottery tickets, however, in this case, the profit from the operation is not going to any good cause, but straight to someone’s pocket.
Why are binary options dangerous for a low skilled customer?
Binary options are deceptively simple to understand, making them a popular choice for low-skilled traders. There are no complicated formulas, no research to be done. You just send the money to the platform and start playing.
In my opinion, there are many factors that should raise a “red flag” when one is considering to start trading.
1. Options are Zero Sum game
As with any financial derivative product, by definition, a fair price of the option should be close to the expected payment multiplied by the probability of the positive outcome. In case of flipping a fair coin, it will be half of the payment, as the probability of getting “head” is 50%.
2. Binary options are prone to price manipulations
An average customer of binary options broker is not capable to evaluate the probability of S&P index closing higher than 2,700 points or of another financial event.
Therefore, in many cases, the broker would display option’s prices far from their fair value, grabbing just more profit from their unsuspecting customers. Exactly like the crooked owner of a rigged casino manipulating the roulette wheel”.
3. Binary options don’t produce any real added value
Binary options can’t be called an investment, as there is nothing productive in this game, nothing that adds real value or makes this world better.
Compare, for example, to stock options that are linked to the firm’s equity that will grow in value if the company produces more profit to its stakeholders.
The initial deposit made to the platform is not an investment, even when the recruiters might call it this way in their advertisements. This is just a security deposit which purpose is to ensure that the customer has enough money to cover his possible loss.
4. Binary options have a very short lifetime
The time span of the option’s life usually is very short, making the whole trading experience very similar to gambling in a casino
5. High possibility to develop an addiction
Addiction is probably the most serious issue with this type of trading. As a new “trader”, you’ll make several trades, maybe even win some and get an appetite for such easy money.
Very soon, you start to lose and are forced to bring more money from home to continue. You hope to recover the losses, start raising the bets and the way to major losses is very short. Saving accounts are emptied, children’s college money enters the game. In some cases, it will end up with bankruptcy.
In any financial market, traders should know how to manage their risks. The most basic rule is that your potential profit is proportional to the risk you are willing to take. The higher the risk, the more possible profit is. And the other way: the higher the promised gain, the higher the risk of a big loss is.
Usually, people are averse to taking a high risk when they understand the game. In the case of binary options trading, the risk is not really explained to them, even if they are required to sign some long and detailed paperwork.
The advertisements would only describe possible profit scenario but never mention any chance to lose money.
Most of the new traders lack proper financial education and have no idea about setting the limits and measuring their risks.
Who can make money on binary options?
1. The owners of trading platforms/outlets.
They make a lot of money from naïve traders, as they collect processing fees, profit from bid-ask differences and often serve as the other side of the contract. As in any casino, the house always wins in the long run.
2. Recruiters getting fat commissions to bring new victims to the outlet.
The recruiters post well-designed banners with stock graphs and their payments, making it look legitimate and professional. Many people are tempted to try their luck and this show goes on and on.
Would you really sleep well knowing you caused stay at home moms, retired workers, students or other desperate for income people to lose their hard-earned money, hope and human dignity for the benefit of your bank account?
I would not. This is not giving back, this is pure taking.
In case, you are not convinced till now, look how many warnings are coming from official sources.
Forbes posted far back in 2010: “Don’t gamble on binary options”.
The FBI estimates that the scammers steal $10 billion annually worldwide. The Agency is actively investigating international binary options fraud, asking victims to report their cases.
Binary options are BANNED by regulators in many jurisdictions that perceive them as a form of GAMBLING.
Many binary options trading platforms have been exposed as fraudulent operations. In most such cases there was no real brokerage, customers were actually betting against the broker.
Canada: BANNED binary options trading for options having an expiration less than 30 days since September 2017.
Israel: Binary options trading was banned by the Israel Securities Authority, as this is not a form of investment management, but rather a form of gambling.
How the trap is set on Facebook and how to expose it
Here is just one conversation I had on Facebook Messenger when someone named Kate sent me a message. I played along asking some simple questions.
Here we have Kate, an expert in IQ options. She guarantees me 100% success (the risk manager inside me starts laughing). What a mix of professionally looking words with absolutely no knowledge! Let’s ask Kate some more questions.
No answer to such a simple question about trivial risk metrics. But now Kate is also a bitcoin professional! Wow, I’m impressed. She promises me 500% profit weekly! Trust me, if she knew how to do it, she wouldn’t be chasing people on Facebook. And the final blow: she has ALL certifications!! (The risk manager inside me can’t breathe from laugh anymore) I’m sure she just has no idea what certifications exist in the financial domain.
Guess what? Kate never replied back. When I tried to look at her profile, I only got an error page. Probably, she just blocked me on the spot.
When you get this type of offers, just ask for a professional certificate. Any financial advisor should have some type of license. If the reaction to such a question is a silence and blocking you, then make your own conclusion.
Don’t waste your money on binary options casino
If you are looking for decent sustainable income source, don’t waste your time and money on binary options trading. There are numerous ways to make additional income from home. Almost, in any case, it will involve building a website, doing some type of internet marketing or promoting some products.
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