Why do people think binary options are a scam?
There are several reasons why some people consider that a binary options scam exists. Over the past few years, binary options have become hugely popular amongst experienced traders and they have attracted a large number of inexperienced and new traders to begin investing in financial markets. The simplicity of the concept, choosing if something will be higher or lower in a matter of minutes or hours, has caused skeptics to assume that a scam exists. The reality, however, is somewhat different and binary options are no more a scam than any other form of financial speculation or investment. The ability for traders to make their own decisions on the direction of markets and the guaranteed pay out that follows if they make the correct decision is difficult to define as a binary options scam. Those who continue to consider it as such generally justify this using a number of different reasons.The most common reason why some consider that binary options may be a scam is linked to the potential reward that they offer. Binary options simply require traders to invest a predetermined amount of money, which they will lose up to 100% if they are wrong and gain 75-85% of this investment if they are right. In contrast to being a reckless and risky investment, both the potential rewards and losses are known prior to parting with a single penny. An agreement is formed between the trader and the trading platform on the pay-out levels and this remains binding throughout the lifetime of the options or until the conditions are mutually adjusted.
Binary options scams invented through inexperience
Those that consider this to be a scam are often the victims of their own inexperience and failure. Whilst binary options’ trading is a simple concept and new traders can begin within just a few minutes of opening an account, it is certainly not an easy way to generate profit without any preparation. Many skilled traders work extremely hard to understand how markets work and develop their own trading strategies in order to be successful. Ultimately all long-term binary options traders would need to manage their money and risk as well as their own trading rules if they are determined to be successful. Those who are quick to dismiss this as a binary options scam have often blown their account or lost money through a reckless trading technique and a misunderstanding of how to trade binary options.Many platforms are keen to promote stories of success in order to encourage new traders to access the markets through their online interface. However, these stories are not entirely feasible, and further more, they also act as an incentive to new traders that binary options have the potential to provide high returns in a very short amount of time. Those that experience a loss, which is also very common for all traders, often look to blame someone or something for their lack of success. Instead of working on one’s trading style and developing a strategy by learning from these mistakes, it is easier to be convinced that the platform is somehow accountable for a bad trading decision.There is one group of traders who do have a valid reason to assume that they have been involved in a binary options scam and these are traders who actually have been scammed. Although this is not common and does not happen if traders use a reputable trading platform, it is a feature of all financial industries and has seen a sharp rise with the rise of the internet. Since many platforms are 100% web-based, they may be difficult to distinguish, although there are several ways to avoid becoming involved in a binary options scam.
Actual Binary options scams
Several high-profile publications have recently warned investors against trading with binary options. The principle reasons that they have identified for taking this position is that with such a large number of brokers emerging, it has increased the possibility for traders to be lured in to an actual binary options scam. There is no denying that in any industry, and especially one which is becoming as popular as binary options trading, where customers are asked to part with their money online, there will be individuals who will attempt to take advantage of this and exploit new and inexperienced members. Fraud on this level, however, is highly illegal in all jurisdictions and cannot be directly attributed to the concept of binary options or the reputable brokers within this industry.Aside from illegal fraud, some people claimed that the platforms themselves operate a binary options scam which seeks to prevent traders from becoming profitable through their trading. This is based on the understanding that binary options are designed to benefit the brokers and platform providers rather than the individual traders who they claim can gain in excess of 85% of their initial investment. Indeed, in some people’s view, the sheer potential for such high returns is reason-enough to assume that binary options is a scam. This is coupled with the stories from unsuccessful traders who have lost their entire investment due to a combination of poor experience and reckless money management during their binary options trading.Despite the minority’s negative opinion of binary options trading, the platforms themselves have striven to remove this image of promoting a binary options scam. Increasing the transparency of the platforms in terms of the execution of trades has gone a long way to reassuring investors that their options will both open and close at precisely the time and price as pre-agreed. This has come a long way from the early days when the slight delay in the data feed and closure of short-term binary options led many to criticize the ethics of binary options platforms that were seen to be delaying this information for their own benefit. Many of these initial fears are still prominent online but convey a highly outdated view of the reality of modern binary options trading as we know it.
How to avoid a binary options scam
Additional fears of a binary options scam have included the failure by some binary options platform providers to fall under national regulation. Since this could make it difficult to distinguish between those providing a genuine service and those simply operating a binary options scam, many brokers are opting to become registered, including Bank of Trade, in order to further reassure their clients. Reputable brokers such as Bank of Trade also offer the following advice to all new traders looking to register with a binary options broker in order to avoid binary options trading scams:
- The first piece of advice to avoid the illusion that binary options is a scam is to learn how to trade and understand how they work. Only education and a good understanding of money management and the trading strategy will avoid losses and are part of the learning curve for all successful traders.
- Thoroughly checking the credentials of the trading platform that you are registering with will help to reassure you of the company’s credibility and to avoid a binary options scam. This can be done through a number of checks including the address, regulatory status and general comments related to their services. It is also highly recommended to call the company and talk directly to an employee to gain confidence in their services.
- One of the most important factors in ascertaining that the broker is not operating a binary options scam is to read press and web discussions relating to the company. Free forums exist and it is always good to have a company recommended by friends and fellow traders before investing in options. If there is no information on a particular broker, or only negative feedback out there, then it may not be worth the risk.
Increasing the chances of binary options success
One of the greatest pitfalls of all traders who are new to binary options trading is to want to make as much money as possible in the shortest period of time. In order to not only preserve your capital, but also to avoid a binary options scam, it is important not to throw everything at this in one go and to take time to learn how binary options works before committing funds. Despite the fact that all of the popular binary options platforms which includes Bank of Trade are reliable and trustworthy, those which are lesser known will require some caution before transferring large deposits. The best way to avoid a binary options scam with these platforms is to only deposit a small amount in order to get a good idea of how the platform operates and if it genuinely provides the services that it offers effectively.
Learning basic trading strategies will improve chances of success
It is also essential that a new trader becomes both familiar and comfortable with binary options in order to avoid becoming one of those traders who thinks that it is a scam. This involves learning the basics of how markets operate and also what binary options you will trade initially; information which is available on the Bank of Trade website for free. Getting to know your chosen markets by monitoring how it behaves is one of the best ways to get a feel for potential trade opportunities as well as learning some basic trading strategies which will hopefully increase the probability that the trading decisions that you make will be the correct ones and result in profitable performance. Too many traders will make the mistake of assuming that, because they are so simple, making money from binary options must be easy. It is very true that it becomes easier but as with everything it takes both time and dedication.
Money management will remove the feeling of being part of a binary options scam
An additional recommendation for those new to binary options and who wish to be given the maximum opportunity to take advantage of the large profit potential is to successfully manage the funds that are available to each trader. Those who are critical of the ‘binary options scam’ have usually experienced large losses soon after beginning to trade binary options. This is a very common occurrence, and one which is easily avoided by simple money management and through limiting the amount that is risked through each trade. Basic rule which can be applied by all new traders is to limit the percentage of a trading account to make sure that you have the resources to continue even after several losses. As practice is a very important aspect of binary options trading, it is important to maintain an active account through limiting the risk exposure of each trade. Both professional and home-based traders maintain that by never trading more than 2% of an account on any single trade will provide the highest opportunity for the trader to become profitable.
The theory behind binary options scams
The theory behind binary options trading scams is generally twofold. The first of these is that many people consider binary options to be a scam after losing all of their account funds through a combination of poor trading decisions and misunderstanding of how to trade binary options. The second of these is the misrepresentation of the financial rewards provided by binary options platforms aimed at increasing the expectations of new traders to assume that they will be highly profitable instantly. Both of these theories support each other in creating the demise of the new trader and also reinforcing a false image that binary option is generally a scam that should be avoided.Thinking rationally about the first theory, it is obvious that every trader cannot possibly be profitable. As with any form of financial speculation there is always going to be risk without which there would be no market as everyone would be profitable, which is simply not possible. Binary options are no exception, although, as with all speculation, there are many winning opportunities as well as the potential for losses. Sensible binary options traders will focus on taking advantage of the existence of these opportunities whilst controlling their exposure to the risks that also exist. This is rarely the approach of those who claim that they are the victim of a binary options scam when their trading decisions have influenced their success.
Be aware of brokers who only promote binary options profits
The problem becomes worse, however, as traders may rightfully feel that they have been the victims of a binary options scam through binary brokers who claim that money can be made easily. These brokers will often convince new traders that they only need to sign up in order to begin earning at least 85% on each trade. Not only is this deceiving, but it does not offer full information of the risks inherent in all financial speculation and which is disclosed openly by Bank of Trade to all potential new members.Those brokers who withhold or present binary options trading as a get-rich-quick scheme are almost certainly worth avoiding. These brokers propagate the image of the binary options scam that those who become victims of often, and rightfully so, complain about. In order to avoid being sucked in to a similar binary options scam, it is best to look for a broker who will not only provide supportive information to new traders, but also the tools to become successful. First and foremost the tools which are most valuable to new binary options traders are the educational resources to develop trading skills. These are offered by all of the most popular binary options brokers, including Bank of Trade.The combination of poor trading knowledge and decisions coupled with the over-inflated expectations advertised by brokers are the underlying reasons for some traders assuming a binary options scam. Whilst returns from winning positions will always be high with binary options, only the best brokers will also disclose the risks whilst supporting their members to become better traders.
Beating the binary options trading scam theory with success
Despite some of the negative news regarding some suggestions of a binary options scam, it is clear that there are a large number of traders who are happily trading profitably with binary options. How is this possible if platforms are set up to cheat and scam traders? The truth is that a large number of those platforms providing access to binary options markets are both highly reputable and also guarantee the profit levels that they offer. This is one factor which has been raised as an issue by several Securities regulators, who have claimed that since losses extend to 100% and winnings are often lower than this, a binary options scam exists.However, this can be countered by two arguments on behalf of platforms which, unlike forex brokers, do not charge a variable spread for commissions and which have a pre-determined risk and reward level with the client prior to entering a trade (hence no slippage caused by a delay in filling orders which is open to manipulation). The first of these is that many brokers, including Bank of Trade, include an insurance rate for losing trades which can be up to 15%, ensuring losses incurred on each trade are also 85%. The second defense is that many binary options brokers offer touch and range options which can far exceed the investment in terms of profit with some platforms offering up to 500% returns.
It is easy to avoid brokers promoting a binary options scam
The reality is that trading successfully is possible with binary options, assuming that the trader is provided with the correct tools to take advantage of high-probability trade setups. This has already been identified as an educational resource for new traders and the limiting of advertising which promotes unrealistic profits without reference to potential losses. Additionally, binary options brokers that are regulated and highlight the risks inherent in any financial speculation to their clients are more likely to promote more confidence in their services.Whilst it is in the interest of all brokers to promote their services, and the competition between these is very good for innovation and customer-orientated competition, it should not be looked at negatively given the high number of quality brokers providing efficient and trustworthy ser ices to their clients. Of these, the most popular brokers, including Bank of Trade, thatprovide services to a vast number of traders have the most to lose from being branded as operating a binary options scam. Therefore, the risk of depositing with a rogue broker that only has its interests in mind is substantially reduced with those brokers that are successfully used by a large number of traders.
Summary of binary options scams
Although there has been some criticism towards binary options trading scams, it is important to recognize that these are not all linked to the brokers themselves. As with all forms of speculation, the risk of incurring losses exists and, in many cases, the bad trading decisions and poor preparation of new traders cause losses of an entire trading, account which is then blamed on the concept of binary options trading. Binary option scams, however, do exist in the minority of cases where fraudulent brokers and those advertising too-good-to-be-true profits operate. These not only bring a bad name to binary options trading, but are often illegal, promoting unregulated online brokers.Luckily, these can be avoided fairly easily by looking at the credentials and doing some research on a number of reputable brokers. Those that are not only highly established and have a good reputation, but also promote the interests of the trader through the tools and features that they genuinely offer can be considered reliable providers of binary options services. These brokers, such as Bank of Trade, offer new and experienced traders the opportunity to learn how to trade binary options and avoid the risk of losing all of the initial deposit. Whilst no profits are ever guaranteed with any financial speculation, binary options brokers that offer this kind of service will help new traders to be successful rather than the victims of a binary options scam.