Are Binary Options Legitimate New Analysis on the Industry

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Are Binary Options Legitimate?

What once started once as an over the counter instrument designed by investment banks, has evolved into a global industry with millions of traders.

Given the immense interest in Binary Options, the internet has been flooded by dubious brokers, internet marketers and dream sellers.

This is unfortunate as not only have they scammed numerous people across the world but they have also tarnished the industry and left people with negative perceptions.

Hence, there may be many people who would even be asking whether binary options are even legitimate? Can anyone really make money trading these instruments?

An Overview of the Instrument

Taking a look at the industry requires a thorough understanding of what a binary option instrument is. We have covered the Binary Options basics previously but very simply, Binary Options are an exotic variant of traditional vanilla options.

Unlike with traditional vanilla options, a Binary option only has one of two options, 0 or 1. The positive pay-out can also be some positive scalar with a lot of Binary Options having a 100 pay-out.

As such, a binary option has a stepwise pay-out function that is instantly recognisable from a traditional option. This is on the graph to the right.

Binary options have been traded OTC (Over the Counter) for a number of years by investment banks. This could either be to take a view with a defined payoff at the end or merely to hedge an event with a binary outcome.

The binary options that are sold between in the Investment Banks are generally quite complicated and the option pricing has a number of different variables which drive it.

However, when it comes to the simple payoff, how to make money on binary options is generally easy to understand. It has become as simple as knowing whether an asset will go up or down. It is for this reason the instrument has become such a popular one on the retail market.

Unlike traditional forex that relied on an understanding of leverage, stop losses, entry points and spreads, trading a Binary Option is straightforward enough. You would decide whether a stock is going up or down. Based on what happens, you would either get some predefined percentage or you would lose your initial investment.

How did it Begin?

Binary Options first started to appear on the retail market back in 2009. Traders enjoyed the idea of entering a trade with a predefined payoff structure.

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  • Binomo

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Other traders liked the idea of being able to pay a relatively small option premium with a much larger positive pay-out. Indeed for a few years traders and brokers alike enjoyed a relatively respectable trading record.

Legitimate binary option brokers respected their clients and the traders themselves knew that there remained a certain degree of risk and they needed to have a reasonable strategy in place in order to make consistent returns.

However, it was when the previous online casino and gambling shops and affiliate marketers got on board that the market started to take a turn for the worse. Similarly, some scammy forex operations that were being shut down decided to move into Binary Options.

Far from being a trading instrument with some degree of risk, they were presented as a wonderful financial instrument with no risk. Brokers and salespeople were telling pensioners and inexperienced traders that trading binary options were the solution to all of their financial needs.

We have kept track of all of the Binary options scams throughout the years and are able to easily spot them. These have all been thrown at all amounts of people globally.

Indeed, the first interaction most people will have with Binary Options is likely to be a scam. This is indeed unfortunate as it has created a deep level of mistrust throughout the industry and made many people wonder whether Binary Options are legitimate.

Where is it Going?

Many industry insiders and traders see Binary Options going the way of traditional Forex traders. There was a time when there were a number of scammy forex brokers who were forced out of business by the authorities.

What remained were well regulated and legitimate forex brokers who really enjoyed the trust of their clients. Indeed, it seems as if many brokers have already decided to take this route and seek regulations.

We have covered Binary Options Regulations previously and are of the view that a regulated broker is indeed a wise first step. Brokers who are regulated have to meet a number of minimum requirements before they can get the stamp of approval.

Regulators such as CySec have also become way stricter in the manner with which they have dealt with brokers who have operated in a dishonest manner.

As more Binary options firms become regulated then the dishonest brokers and scammers will get shutdown. This will mean that traders will be able to easily choose brokers without the spectre of running into a trap.

Can a trader Make Money?

Given the vast amount of scams out there, a number of people are of the view that one cannot realistically make money with Binary options. If a trader lands up with a broker or a trading system that is dishonest then they are most likely to lost money.

Yet, Binary options as an instrument itself can make money for the trader. They are a legitimate investment and trading product just like forex pairs and other derivatives.

However, like trading any other financial product, the trader needs to have an appreciation for risk as well as have an effective strategy. Trading binary options requires a certain degree of education and training. It is not something that someone with no experience can easily pick up and make sustainable returns doing. It requires a concerted effort as well as discipline.

However, if the trader is indeed serious about making returns trading Binary Options, they are still one of the best instruments to use for a risk controlled binary options strategy.

How to Make Money with Binary Options

Now that you know that it is possible to make reasonable returns trading Binary Options, you need to implement the right strategies, option types, brokers and signal providers. This step by step process will help new traders understand what is required in order to make money trading Binary Options.

1. Have a plan

Before trading Binary Options, the trader should lay out his or her objectives, investment horizon and general trading expectations. Too many traders just jump into the market without a clear strategy or game plan.

The trader needs to know their own risk tolerance levels as this will inform how much they will invest on each trade as well as their max daily draw-down.

You should also have a relatively good understanding of the fundamentals of Binary Options Trading such as expiry time, type of option and strike price.

2. Find a Legitimate Binary Options Broker

This step can be easier said than done. Given the amount of dishonesty online, legitimate binary options brokers can be slightly difficult to find. However, there are a number of things that you can do in terms of due diligence that will make certain that the broker is legitimate.

Firstly, you should ask them for important information such as regulations, trading platform, pay-out policies, legal domicile, and customer support. These are all factors which an honest broker will be forthcoming about.

If you are satisfied with the answers that you have received, you can do some external vetting and due diligence online. Take a look at trader reviews on forums as well as review sites. Make certain that the reviews are honest and are not being pushed by the broker themselves. We have a list of legitimate brokers at the club.

Ask to speak with the senior broker and make certain that you are comfortable with the level of interaction they provide. If you are certain that the broker is worthy of your time, you can progress to the next step.

3. Test your Trading on a Demo

Although you may be quite eager to start trading, it would be a wise decision to first test out a demo account. This will allow you to get used to the Broker’s platform and to practice your trading.

You will also need to make use of some training and education materials. Although trading Binary options can be relatively straightforward, doing it on a regular and consistent basis is not always so easy.

You have to know important disciplines around using binary option signals, fundamental analysis, price action and money management.

Once you have been trading on demo for some time and are comfortable with your trading ability you can move onto the next step.

4. Open a Live Account

You are now ready to open a live account with the broker. Depending on the broker that you use, there may be different minimum funding requirements. We would recommend depositing the minimum amount just to make certain that the live account operates in a similar fashion to the demo.

It also makes sense to cross check the levels that you are getting with the live account with those that you were getting on the demo and with other data providers like Bloomberg and Reuters.

Once you have traded for a bit, try to withdraw. See how the process works and how long the withdrawal will take. If you are comfortable with the withdrawal process and are satisfied that the binary options broker is legitimate, you can invest more money.

What is important, however, is to only invest as much money as you are comfortable to lose. This is because trading Binary Options does involve risk and no one can be completely certain that markets will move in their favour.

5. Stick to your Guns

If you are seeing different returns in your strategy when done in the real account than you were seeing on the demo, this could come down to how you are reacting to the markets and how you are closing the trades.

Emotion could also be clouding your judgement. When there is real money involved in a trade, we tend to react differently based on the risk associated with it.

The best traders know that this is a mistake. You should never let risk cloud your judgement and impact on your trading style. Enter and exit positions based on your strategy and not on the perceived profit or loss.

Whatever you do, do not attempt to sign your account over to the broker if they are offering to manage the account for you. This is a conflict of interest and could lead to a collapse in the value of your account.

Join Trading Communities

Are Binary Options Legitimate? As an instrument, yes they are. As an industry you need to know what to look for. As shown there are many potential pitfalls that you need to be aware of.

One of the most effective ways to avoid this is to talk with like-minded traders in a community. Fellow traders have their own experiences that they would like to share with us. This is the main goal of the trading club, to find the legitimate binary options brokers, signals and services.

Honestly, is binary options trading legit? How is it different from trading stocks? And can an average trade profit from it?

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I would recommend the Executive Programme in Algorithmic Trading (EPAT) by QuantInsti – a comprehensive course spread across 14 modules broadly classified into 3 categories name.

Yes, Binary Options trading is legitimate.

Are there scams in the industry and unscrupulous brokers? Yes, there are indeed. I have seen way too many to count.

Many people have been witness to one of these scams and as such have come to the conclusion that the entire industry is flawed.

Although I can understand this rationale to a certain degree, the regulators are getting on board and actively trying to regulate the brokers.

This means that they traders will be able to trade binary options without the fear of being scammed by affiliate marketers or the brokers.

Are Binary Options Legitimate? New Analysis on the Industry

December 15, 2020

You can’t read an investment blog without coming across posts about binary options. There’s a lot of money in binary options – for users, brokers, and advertisers – so this won’t change overnight. Binary options trading is legitimate, but incredibly risky. You’ve got to understand the the industry and the risks involved – and you might be better served staying away entirely.

Don’t believe reviewers who pitch binary options as a quick fix for your financial problems. In reality, nothing can be farther from the truth.

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 traders try to predict whether the value of such assets will increase or decrease during a certain time frame.

If your prediction comes true, you will win and earn a commission on your investment. If the value doesn’t change as you predicted, you will lose all the money invested to lock in your prediction.

Presented this way it becomes obvious that binary options trading is more like sports betting than real investing. Binary options is nothing more than betting on financial assets, much like you would bet on the outcome of a sports game.

So, is it a scam?

This doesn’t make binary options a scam. It’s just not an investment.

The majority of binary options brokers are legit businesses. As legitimate brokerage houses, your money will not be stolen and you won’t be defrauded.

The problem is that the majority of brokers promise unrealistic expectations. The average user does not get results like these.

The most common way binary brokers attract new traders is to show them cases where simple people managed to win huge amounts of money by just trading low amounts on gold and other popular assets.

Sure, cases like that do exist, but they are the exception not the rule. The same way some sports gamblers manage to win extremely large sums, skilled/lucky binary options traders occasionally make bank. However, this happens extremely rarely.

Not knowing this, a lot of people sign up with binary options brokers that offer unrealistic winning promises. In the end, lots of people end up losing all of the money they put into the system.

But can you really win?

The biggest factor in winning at binary options is LUCK. But yes, you can really win.

The thing brokers will not tell you is that you will have to put in a lot of effort and research if you want to win consistently. And even then, luck is the most powerful variable.

Like in sports betting, if you want to win you will have to have a great knowledge about the sport in question and about the teams that are playing. You will have to understand the game, the strengths and weaknesses of the teams, and the skills of the players. You will have to know about historical performance, fitness levels, injuries, and dozens of other variables. Even then, things might not go your way.

If you factor in all these variables then you probably will win in the long run. It’s exactly the same in binary options trading. There are countless variables and risks that you will have to consider in order to accurately predict the future development of an asset.

Issues like time of the year, state of the economy, political developments, economic performance of key market makers, recent business news and events are constantly influencing the movement of stock prices and commodities.

In order to be able to accurately predict the movement of an asset, you will have to be up to date with all of this info. Also, in order to be successful you will have to understand a variety of technical data as well, such as being able to read charts, use technical indicators, understand statistic calculations, and much more.

As you can see, binary options is much more than just investing $100 on gold and then getting $300 back 10 minutes later. If this is your approach, then you will lose 100% of your investment sooner than later.

But that sounds hard!

Yes indeed! That’s exactly what solid binary trading requires. I know most entities advertising binary options make a lot of bold promises, but in reality it’s much more complicated. In order to really make money you will have to invest significant amounts of time in market research and learning about the technical aspects of this business.

No matter what anyone promises, you will never be able to make easy money by placing random bets here and there. Brokers count on you doing exactly this because they know that this way, you will be paying the price of becoming a losing trader (meaning brokers will be making money off of you).

So, this is the truth behind the binary option business. There isn’t anything inherently wrong with this form of online trading (or, better said, betting), except that brokers are artificially hyped up and are dishonestly presented as something they’re not.

So one more time, is Binary Options Trading a Scam?

Binary Options trading isn’t a scam, but it’s financial gambling that will only work well in the long term for the most devoted and knowledgeable users.

2020 Update: Binary Options Industry Changes

If you read our thoughts from 2020, you know that binary options is legit, but extremely risky and difficult to take part in profitably. But that was back in 2020. Things have changed quite a bit since then.

As mentioned above, there is still no easy shortcut to binary options trading success – you will still need to learn the basics of this trading form and do lots of market research to make real money. That said, some new developments have appeared in the industry which might make it easier for you to make a living through binary options trading.

More Welcoming To New Traders

For one, social trading has finally become a major aspect of binary options trading. Newbies who would like to start making money without having to fight against a gnarly learning curve can look to the practices of seasoned veterans. Some brokers even offer in-house social trading platforms that let you profit from the trading experience of highly successful binary option traders within the company.

Of course, there is the risk that the trader is going to fail, in which case you risk losing money just the same. So, you will have to choose your signal providers very carefully to avoid disappointment.

We now have binary options robots as well, which purport to automate winning trades for users. Unfortunately, many of these bots are scams, which is why you would be better off avoiding them altogether (unless in cases where your broker is offering their own auto trading services).

Even then, you cannot really count on a broker to give you a highly profitable automated trading tool. Why would a broker give you the tools to take their money? You will have to do your own research first to see if the auto trading system is worth its salt. And should you choose to use an independent binary trading robot company, you will have to be extra vigilant to avoid getting scammed.

More Tools For Advanced Traders

It is easier to access quality financial information needed to make intelligent trading decisions than it was two years ago. Premium binary option brokers now have great platforms that provide excellent data for comprehensive technical analysis on the assets you are trading, helping you to make better trades.

Additionally, there have been cases of brokers introducing robots that scour financial newswires, giving you the latest events so you can anticipate market fluctuations. All these advancements make binary options trading easier (for people willing to put in the time to learn the system inside and out).

Still Legit?

Yes, binary options is legit, and growing. But you will still have to jump through lots of hoops to make it in the industry as a beginner. There are also plenty of scams to take advantage of helpless new binary options traders who don’t know how the industry works. At the same time, we now have a broader selection of trustworthy brokers and signal providers than we had a few years ago.

Furthermore, better information and technical analysis makes the industry more lucrative for dedicated users. Even so, you will have to be a lot more watchful of who you get into bed with when entering the industry to keep your money from falling into the wrong hands. If you are willing to put in the work, learn through trial and error, and develop better methods than the average binary options trader, you can actually make money with binary options in 2020.

Best Binary Options Brokers 2020:
  • Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Trading Education, Free Demo Account!
    Get Your Sing-Up Bonus Now!

  • Binomo

    Good Broker. Only For Experienced Traders!

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