Tag: Binary Options Trading

Categories
Forex Trade Types

Binary Options Warning! Five Risks to Avoid

There are many ways to lose your money in this world but here’s one you haven’t met before: Binary options websites (digital options or fixed-profit options). An innovation that has shown great growth in recent years, but as social trading and managed accounts, is something so new that there is very little information about it.

There are many ways to lose your money in this world but here’s one you haven’t met before: Binary options websites (digital options or fixed-profit options). An innovation that has shown great growth in recent years, but as social trading and managed accounts, is something so new that there is very little information about it.

There are many ways to lose your money in this world but here’s one you haven’t met before: Binary options websites (digital options or fixed-profit options). An innovation that has shown great growth in recent years, but as social trading and managed accounts, is something so new that there is very little information about it.

The sites attract the same kind of people who play online poker and other types of casino games. But somehow they have an aura of being more respectable because they present themselves as a form of investment. Don’t get your hopes up. These are simple, pure gambling sites. It is naturally a matter of time before local authorities sanction them, as well as with the European authorities. Did they promise you that you can live on binary options? then everything you need to know about them.

What are binary options?

Earn 70% in one hour! Limited risk! you simply have to predict the trend and bingo! No experience is needed! Try to google binary options, and that’s what they typically use to sell to you. The material is more focused on attracting speculators who are not careful, than on attracting and teaching prudent and serious traders and investors how and when to use binary options. Like most rational adults, you should stop believing in promises to get rich fast just like you did when you stopped believing in Santa Claus.

The rise of binary options for forex and other instruments has literally been exploited since 2010-12 by the combination of simplicity and its high-profit potential. Then, you can enter a bet (which is really so) on anything that is publicly traded, depending on the website you use. Some sites offer free guides on how to get started with binary options.

Here is a brief summary of the key points you should know to get an idea of binary options as another alternative to lifelong trading in forex, stock exchange, commodities, cryptocurrency, and ETFs. Read on for more information or start trading and see for yourself as the classic CFD trading, not the bets, can make you win a lot of money.

Here are the 5 points you should know about binary options – the most important lessons you will learn.

A Risk-Negative Benefit Ratio

Something common for the trader is to make 75% of what he bets correctly. For example, if a trader places $100 betting on the value of the Eurusd going up, and he hits, he will receive $75 plus his initial investment. If the value of this pair goes down, the trader loses 100% of what he bet.

That means you have to hit 55% of the time not to waste your money and most of the time to try to make money with binary options. The house naturally has an advantage. Binary options work much like a roulette wheel: if your prediction is incorrect, you will lose the entire capital that was risked, but if your bet is correct you get your money plus a profit.

Those who are better able to manage capital and risk will generally be more able to get better risk/benefit ratios with forex and difference contracts, where the risk management rules tell them to bet only when there is at least one risk/benefit ratio of 1:3.

Forex traders and difference contracts can be winners with a small percentage of successful transactions. Negotiating difference contracts is more about how much you can do when you’re right and how little you can lose when you’re wrong using tools like Stop Loss and Take Profit.

It Is Impossible to Know Price Movement In Advance

No one, no matter how much knowledge they have, can consistently predict where a currency pair, stock, or commodity is going to move in a short period of time. Will the gold price go up or down in the next 10 minutes? Unless a major event has just occurred, there is no way to predict that. In order to make money by trading gold, for example, one must understand these 3 things about it:

Do Not Place Orders in Advance

This means you must be ready and waiting if you want to enter a specific point. That is really an inconvenience, and for those who are not always seeing the markets (and who does), that can mean lost opportunities and absolutely no flexibility.

In traditional forex trading and difference contracts, traders are free to decide where and when they can enter the market, how long will they remain in their positions? , and under what conditions they will leave. As a result, the markets have no power over the traders and do not generate any expectations from them.

Most of the merchants (and we speak especially of those who are more novices in the markets) are very unaware of different types of orders such as Market, Stop, Limit, or combo. And commands are like tools: you want the right one to do the job.

The way to do this in a simple way is to use the “limit” type orders that dictate how much you want to pay… always in advance. You get that price or the order doesn’t go through.

A Limited Selection of Instruments

Most binary options brokers do not offer a wide variety of trading instruments like most of the best forex brokers, however, they offer the most popular instruments, which is a problem for some traders.

Binary options brokers offer fewer services. For example, graphics packages, as well as training and mentoring in trading tend to be minimal or non-existent. Binary options traders will need to find their own software for graphics as well as for data analysis in order to make a true technical analysis.

They Are Not Regulated

Finally, these websites are unregulated. No authority is protecting people’s interests. This is a financial Old West. The Financial Conduct Authority (FCA UK) has obliged a permanent veto on the sale of binary options to retail customers to reduce the risk of fraud and prevents the amount of £17 million a year in consumer losses!

Frauds through binary options are under the spotlight of the police. Even the FBI has commented that binary options trading is very dangerous and has classified it as a new form of fraud, here is the FBI’s message and link:

Stock options. It is a fairly common investment term, in general, that one party sells or offers another the opportunity to invest by buying a particular share at a previously agreed price over a period of time. Everything perfectly legal and highly regulated- and if the investor takes advantage of the opportunity and action has a good performance, there is a benefit to be obtained. And if the stock doesn’t perform well, well, the investor knows the risk.

But here is another similar financial term from which the public must take care-binary options.

Binary options fraud is a growing problem, which the FBI is targeting. In 2011, our Cyber Crime Complaints Center (IC3) received 4 complaints-with reported losses of just over $20,000-from victims of binary options fraud. Five years have passed and the IC3 has received hundreds of complaints with millions of dollars in losses reported during 2016. And those numbers only reflect the victims who have reported to IC3-The true extent of fraud, which has victims around the world, is really unknown. Some European countries have reported that complaints about binary options fraud account for 25 percent of all complaints they receive.

So, where does fraud come in? The perpetrators behind many binary options websites, mainly criminals who are in other countries, are only interested in one thing-taking your money. Complaints about your activities usually fall into one of these categories:

They refuse to pay withdrawals to customers or reimburse them. This is usually done by canceling customer withdrawal orders, ignoring customer calls and emails as well as sometimes freezing their accounts and accusing the customer himself of being a fraud.

Identity theft. Representatives of binary options websites may falsely say that the government requires photocopies of your credit cards, passport, license, electricity, water, phone, or other personal data. This information can potentially be used to steal your identity.

Manipulation of trading software. Some of these online platforms may have reconfigured the algorithms they use to make the customer lose, usually distorting prices and payments. For example, if a customer has a successful transaction, the expiration is extended to become a loss.

Fraudulent websites have no scruples about recruiting investors. They post their platforms-usually on social media, trading websites, chat platforms, and spam spam-with the great promise of easy money, low risk, and great customer care. Potential investors also receive cold calls from the trading room, where sellers put a lot of pressure using bank phone numbers to make as many calls as possible to offer a once-in-a-lifetime opportunity.

What is being done to combat binary options fraud? The FBI currently has a number of cases of fraud with binary options, working with sister institutions such as the CFTC and the Securities and Exchange Commission (SEC). And this past January, the bureau organized the 2017 Europol Binary Options Fraud Summit in the Hague, bringing together regulators from North America and Europe to discuss the growing problem of fraud with binary options.

Special Agent Milan Kosanovich, who works for the criminal division of complex financial crimes, was one of the FBI representatives at this meeting.” The summit, he said, “gave us all the opportunity to sit down and talk about what we discovered with regard to our investigations of binary options fraud, where are the challenges? And how can we all work together?”

One of the biggest obstacles facing the authorities, according to Kosanovich, is the fact that fraudsters are sophisticated and have operations in several countries. “So the key to dealing with this type of fraud,” he continues, “is national and international coordination between regulatory agencies, authorities, and the financial industry.”

Another important factor, Kosanovich said, is that the investor is educated and informed. “Investors need to be informed of the great potential for fraud on a binary options website and need to make sure they do a good investigation before they even place the first transaction or bet.” Source: https://www.fbi.gov/news/stories/binary-options-fraud

Did trading become easier or just riskier? First, this kind of thing can easily become an addiction, especially for market addicts. However, although the amounts you bet may be small, the total can quickly be added up if several bets are placed in one day. It won’t take long to get out of control.

Second, no one, no matter how much knowledge they have, can consistently predict what action or raw material will do in a short period of time. Will EUR/USD or GOLD go up or down in the next 10 minutes? No chance of even guessing that. Binary Options traders simply bet on whether the price of an instrument will be up or down a certain point in a specific period of time.

Third, the house definitely has an advantage. Binary options trading works in a similar way to roulette: if your prediction is incorrect, you lose all the capital you put at risk, but if the prediction is correct, you get your money back plus a profit.

If people want to bet, that’s their choice. But we shouldn’t confuse that with investing. In my personal opinion, binary options are most often a fraud, pure and simple.

Categories
Forex Basics

What Is the True Difference Between Forex and Binary Options?

Today we will focus on trying to respond to a very frequently asked question in the world of trading: What is the difference between binary options and Forex? In the following article, you will find answers to questions such as: What are binary options? How do binary options work? Can you win in binary options? […]

Today we will focus on trying to respond to a very frequently asked question in the world of trading: What is the difference between binary options and Forex? In the following article, you will find answers to questions such as: What are binary options? How do binary options work? Can you win in binary options? […]

Today we will focus on trying to respond to a very frequently asked question in the world of trading: What is the difference between binary options and Forex? In the following article, you will find answers to questions such as: What are binary options? How do binary options work? Can you win in binary options? In addition, I will also share my opinion about what is better and more profitable, Forex, or binary options.

Novelty Instant Benefit

About 10 years ago, most broker companies specializing in stock markets, suddenly, with a single voice, began to proclaim in every corner a new super service, “binary option”. At that time, very few investors could understand what it was, but the thirst for instant profit made this tool very attractive. In those days, no one had a similar offer, because it was, in fact, a home casino, but with constant access and a wallet with an initial minimum. Now enough time has passed and the consumer began to understand that the binary option is not such a brilliant instrument and that it most often leads not to instant gains, but to instant loss. To give your own opinion of this instrument, you need to understand what it is.

What is a Binary Option?

So what exactly is a binary option? If we want to answer this particular question, we have to look at its structure. The name is made up of two words: binary and option. The word “binary” is derived from the concept of “binary model”, a model that has only two variants of an event, or is “yes” or “no”. This model is one of the main ones of the instrument, or win or lose, there are no other options. Now the word is “option”. Everything is much deeper here, this concept is taken as a derivative of the real stock option. A “stock option” is a derivative financial instrument, which is based on the rule of future performance of the contract in the event that a pre-established condition is met.

Therefore, by putting these two concepts together, we get an instrument that works according to the rules of the stock exchange contract and has only two options for the event. In other words, by concluding such a contract, you have either won or lost.

Let’s look at the working mechanism of the binary option based on the most popular parameter of the contract, “high/low” This type of contract means that you have chosen the target price level and the direction of the agreement. For example, we think the EUR/USD currency pair will fall in the next 5 minutes. We select the level from which the calculation will be performed and put the option down. Therefore, if the price in 5 minutes is lower than this level, we will get a benefit, and if it is higher, we will get a loss. We chose the bet size, for example, $50 and go!

The position of our option will look like this, as shown in the chart above. All that is red below is our benefit and all that is up is loss. The main feature that distinguishes such a contract will be the fact that we do not care how many points the price will be higher or lower: our gains or losses are always fixed.

Therefore, it passed 2 minutes after the conclusion of the options contract, and during this time the price was below our reference level. Therefore, the time of our choice is over, we obtained a profit equal to 80-85% of our bet.

Three minutes later, our option was executed, as time has expired (expiration occurred). But unfortunately, the price shot up at the last minute and went above our benchmark, which caused us a loss in the size of our $50 bet. It’s as simple as that. Of course, there are still many different variations in the binary option, but we will talk about them directly compared to the Forex market.

What Is the Main Difference Between Binary Options and Forex?

The comparison of these two types of trading will occur in a number of the most important parameters:

Variety of Contract Types

In Forex there is only one type of contract. No, of course, you can trade with currency pairs, CFDs, commodities, or securities, but these are only variants of the same type of contract: CFD price difference contract (Contract For Difference). You bought a currency pair and its price has increased, you will get the difference between the sales price and the subsequent purchase price.

There are several types of contracts in binary options: this is the most common “high/ low” that we have already seen, is the “touch option”, where you should wait for it to reach a certain level, the “range option”, where you should specify a target price range, and the “ladder option” of higher performance.

Value of Potential Benefit

In Forex, your performance is not limited. Of course, you can limit it to placing fixed orders, but if you’re talking about a simple managed deal, you can generate your profits until you close it yourself at the price you’re interested in. It’s not uncommon for you to make a deal, and literally within a few minutes, the price flies to a lot of points, giving you a much higher profit than you expected.

When trading with binary options, your earnings are always limited by the type of contract selected. And, most importantly, your win can never be greater than your bet. If you put $100, you’ll get, at best, $90. In case you lose, you lose all $100. Yes, there are different options for all contract types, however, in any case, the success ratio will always tend to loss. But distributors of these options are always in profit.

An example of how binary options work cleverly:

-We place a bet, for example on the pair AUD/USD of $1000, at the time of clicking the button “buy” or “sell” instantly the balance deducts the $1000 from the bet.

-If I get the bet right, then I’ll see that the “profit was $1710”, actually it was $710 ($1000, as we remember, was deducted at the time of opening the bet and when I got it right, it came back).

-If I do not get the bet right, then I will see that the “profit was $0”, but the $1000 I have already lost, and in case I fail these funds will be lost.

-It looks great, and in fact, the loss of the same option is always more beneficial.

-In Forex, with the same agreement and the equivalent price movement up or down, the profit/loss will also be the same.

Possibility of Margin Trading

In Forex margin trading has reached perhaps the highest level of development. Forex brokers provide leverage in almost any range, from 1 to 2 to 1 to 1000, and even more. We agree, such a large amount of credit money can provide us almost unlimited opportunities for profit, which is sometimes 1000 times more than our invested capital.

In binary options, there is no such concept as margin trading. Everything is limited only to the notion of bets. If you have $100, then only with this $100 can you trade. This is an absolute disadvantage in modern trading realities.

Easy to Make Deals

Forex is considered the simplest and most modernized trading system among all foreign exchange markets. The transaction system refers to a process that goes from the analysis to the moment your order is placed on the market. There are several trading platforms, some with extended functionality, however, to understand them is not difficult.

In binary options, the settlement system is even easier than in Forex. Essentially, the entire trading agreement is reduced to the choice of a financial instrument, such as an option, run time, and clicking the “buy” or “sell” button. Let us not talk about the effectiveness of such an operation, but about the possibilities that are 50/50.

Duration of Stay in the Agreement

In Forex all contracts are indefinite, and therefore do not have a term of treatment (expiration). This means that when we enter the agreement we can wait the time until the price is not where it was waiting. Yes, there are commissions that can do a lot of damage, but it is no longer in this area.

In binary options all contracts are fixed-term. All options have a very limited lifespan, so, “wait for the storm” as in Forex, will not succeed. This type of contract completely excludes the investment component, leaving us only pure speculation.

Minimum Start-Up Capital

On Forex, this limit is almost erased, and you can start trading, even if you only have $10. But you must understand that the less your initial investment, the more leverage you need to take from your broker, and this increases risks many times over. In binary options, the minimum initial capital is even $1. Then your income will be equal to the minimum. Perhaps, for a person who just wants to get acquainted with these contracts, this is enough.

Conclusion

If we listen to all the questions I’ve told you before, we can make a small summary:

Forex: This is a stock market where, as in the stock market, as in other financial markets, there are laws of supply and demand. Agreements are made at different intervals of time, however, statistics show that transactions at long intervals of time are the most effective and most often yield profits. Forex pays a lot of attention to technical and fundamental analysis. There are a large number of different active transaction management systems, allowing you to benefit even from completely desperate transactions. Competent use of margin trading can increase your investment capital many times, allowing you to make a much greater profit. Of course, success on Forex requires market analysis, trading strategy, expertise, and the use of informational materials. This market cannot be conquered by leaps and bounds. If we want a Forex trader to achieve greed in every trade, you need to train and gain experience.

Binary Options: The binary options market is an over-the-counter market (OTC-market), or rather, it is not a market at all, as binary options brokers are liquidity providers, market makers, and in general, everything they want. In most cases, the quote is only a projection and has nothing to do with the actual price of the asset. And when we talk about “turbo options”, brokers simply draw the quote that is profitable for them in front of the group of their players. In fact, a binary options broker is a bookmaker that spreads what you want to your customers.

The high commission for a profitable transaction makes the popular 50/50 stock ratio absolutely unprofitable, as it will never earn as much as it invested. The benefits of the same option will always be less than a loss. In general, a binary option is a pure casino or addictive gambling that has nothing to do with real trading in the financial markets. Options are a game according to the owner’s rules. You can check the demo account of any binary options broker.

In this article, I have expressed my opinion only, which is supported by the practical experience of developing and implementing various stock exchange contracts. I really like the “real binary option” model, which I consider the best of all stock contracts, but it has nothing to do with the “binary option”. With which instrument to work, the choice is yours. I just want to wish you lots of luck and lots of benefits!

Categories
Forex Trade Types

Binary Options vs. Forex – Which is the Best?

Both spot forex and binary options are emerging industries with a number of people joining their respective markets every day. Whereas forex seems to be drawing a lot of interest across the globe as of recently, binary options existed over-the-counter for quite a while only to start getting more attention in the past few years. While we know how both markets are tradable online allowing traders to start off with small amounts of capital, there still may be reasons why anyone would prefer one over the other. If you are wondering which one is better, buckle up because today we are going through all advantages and disadvantages of the two financial trading markets.

Both spot forex and binary options are emerging industries with a number of people joining their respective markets every day. Whereas forex seems to be drawing a lot of interest across the globe as of recently, binary options existed over-the-counter for quite a while only to start getting more attention in the past few years. While we know how both markets are tradable online allowing traders to start off with small amounts of capital, there still may be reasons why anyone would prefer one over the other. If you are wondering which one is better, buckle up because today we are going through all advantages and disadvantages of the two financial trading markets.

Both spot forex and binary options are emerging industries with a number of people joining their respective markets every day. Whereas forex seems to be drawing a lot of interest across the globe as of recently, binary options existed over-the-counter for quite a while only to start getting more attention in the past few years. While we know how both markets are tradable online allowing traders to start off with small amounts of capital, there still may be reasons why anyone would prefer one over the other. If you are wondering which one is better, buckle up because today we are going through all advantages and disadvantages of the two financial trading markets.

The binary options market depends on the trader’s choice

Before we start comparing and contrasting, let us first see what we know so far about binary options. This financial product, which is also referred to as all-or-nothing options, digital options, and fixed return options, is essentially based on a prediction that offers the trader a fixed payout. The overall success of any binary options trade depends on whether the outcome matches the trader’s yes/no proposition. The fact that there are only two possible outcomes of such trades, yes or no, also determined the market’s name (binary). Interestingly enough, most binary options trading takes place outside the United States and many outlets used for these purposes have already proved to be fraudulent. While the FBI keeps investigating binary options scams across the world, Facebook has even banned any binary options trading advertisements. Still, the market is said to currently number approximately 90 companies offering binary options trading services.

Forex is limited to currency trading

As opposed to currency trading, binary options trading is increasingly flexible in terms of available markets. Binary options traders have the ability to choose between forex, stock indices, and commodities, among others. Binary options trading begins with a trader’s decision whether an asset’s price, for example, will rise above a specific amount on a particular day and time. If the events unfold as the trader hoped, he/she will get the specified percentage of the agreed-upon stake. Nonetheless, the value returned to the trader also depends on whether the market is in or out of the money. 

Binary options involve no additional costs

While forex allows traders to take a specific position in a trade, binary options trading does not. It does, however, specify a fixed maximum payout, while the risk is tied to the initially invested sum. Although price movement in forex can have quite a significant impact on the trade, profit, and loss in binary options trades are not affected in the same manner. Transaction costs are another point where the two markets differ since binary options trading does not involve any additional transaction costs apart from the money included in the payout or the loss. Forex traders, however, also need to think of a variety of other costs such as the spread or commission.

Forex traders can maximize their profit

Unlike forex, binary options have a predetermined expiry date (point in time) after which the gain or loss is automatically credited/debited to the trader’s account. Some binary options, however, can be closed before expiration, but this usually influences the amount of money a trader will earn in the end. Similarly, some brokers permit traders to delay their expiry time to the next expiry time, which is only plausible when traders increase their investment by a specific percentage. In the forex market, on the contrary, market participants can close their trades at any time except weekends (true for most brokers). Moreover, while in currency trading long trends can be recognized and utilized so that a trader can maximize the profit through the use of specific strategies, binary options traders are limited by the set expiry dates and cannot use margins.

Binary options traders actually have fewer options

Even though both forex and binary options can be traded Monday through Friday, many binary options deals are only available at certain times of the day or the week. Therefore, with binary options, traders may not be able to find the best option even if they have an idea of how the market is going to behave. Furthermore, the strike prices in the binary options market are generally set by the broker, which does make it different from forex. 

The forex market can react unpredictably

While currency trading is prone to volatile and sluggish periods alike, binary options trading is typically unencumbered by volatility regardless of events taking place at the time of the trade. Also, while in forex the market can react quite unpredictably, binary options traders can be at peace knowing that both their maximum risk and maximum reward are already set. In forex, however, the maximum loss may be one’s entire account.

You need to win the majority of binary options trades

Forex trading allows the market participant to set individual profit targets and stop losses so that any trader can make a profit even if they fail to win most of their trades. Nonetheless, if you want to invest in binary options for the long haul, you will probably need to win the majority of the bets. However, since it is a trader’s call to decide on the price’s direction and how high or low it will go, the ultimate risk is unknown.

The binary options margin for errors is small 

Binary options vary in type, so traders can opt for high/low, 60-second options, touch/no-touch options, boundary options, and option builders. Forex also entails a variety of different orders, with buy and sell being the most important ones. Still, despite these similarities, the trader errors can have a carrying impact on the two markets. In binary options trading, the error margin is quite small since there are only two possible actions to take – open and close. In forex trading, however, a trader may forget to set a stop loss or fail to readjust orders, which could lead to a major loss.

Acknowledge and accept the differences

The forex and the binary options markets are quite different and they require traders to understand the existing discrepancies so as to gain success in either of them. Those who have started off with binary trading may need to recognize the importance of developing a stable and tested system along with learning the forex-specific tools. Likewise, experienced forex traders may find binary options to be too different, which is what professional currency traders claim to have felt the first time they interacted with this market as well.

You know the answer

Some forex traders may misunderstand and even underestimate the binary options market as much as binary options traders may find forex to be too risky or volatile. Therefore, the answer to the question in the title lies in you – are you open to learning about a new market? Whatever answer you give and whichever market you opt for, make sure that you do it all the way and that you protect yourself from the risk. Expanding to the binary options market may be a perfect opportunity to increase your income, while for some learning about forex may not be worth it. Although forex may take time to understand and earn a profit, one can become a prop trader and thus ensure affluence. On the other hand, any trader may choose to earn extra income alongside gaining forex education through trading binary options. Either way, traders will surely gain from learning about both because each market comes with its own set of benefits.