You've probably seen a bunch of ads telling you how easy it is to make money “trading” the markets with Binary Options. You've probably seen the blog posts and articles, telling you how they made millions. But is there any truth to this? Can you possibly make money from Binary Options?
The Truth About Binary Options
Binary options present try and fool you into thinking you have more than a gambling chance of picking if an asset will increase or decrease in value over a set period of time. But the reality is that no one can accurately predict the price of an asset over a short period of time.
Sure, there are companies that currently working on trying to do just that – but they have millions of dollars and vast amounts of computing power. You don't.
Even the very best traders won't be able to predict the price movement over a period as short as 1 minute.
Doing the math
Binary options work much like casinos do. They tempt you with the ability to win money – and there is always that chance, but the brokers always have the edge. Just like a casino does. It's simply maths. So the longer you trade the more chance the broker has of winning against you.
When you lose a trade on a binary options platform, you lose 100% of your money. Unlike a regular forex or stock trade, which you can close out at anytime to limit your losses. But the news is even worse when you win – because you never win 100% back. You'll win anywhere from 30-90% depending on your broker.
So the simple maths tells us that the broker will come out on top the longer we try and trade.
Binary Options isn't Trading
It's important to remember that Binary Options isn't a form of trading or investment. It's a form of gambling.
I have a lot of trader friends. Many of which make a very healthy full time income from trading – whether its stocks, forex or commodities. But I don't know anyone who makes a full time income from Binary Options. I do believe many get fooled into thinking that if they win one or two trades to begin with, they can do it on a long term basis. This just never happens.
What about those Guarantees?
You may have come across those popup ads where a guy in a video tells you that if you don't make however many thousand, they will give you your money back. This is just a scam. Plain and simple. And regulatory authorities are starting to thankfully crack down on these. Remember – if it sounds too good to be true. It is!
So my advice – stay as far away as possible from Binary Options. The good news is there are legit alternatives. From forex trading and stock trading, copy trading, and automated investments in index funds. I've written an entire post about some of the alternatives to binary options that aren't straight scams.
Have you tried binary options. I'm interested in hearing about your experiences. Let me know in the comments.