Although binary options is a fast growing way in which to trade on financial markets, there are plenty of reports of this method of trading being a scam. Many of the accusations and criticisms of this trading method centre on the brokers who offer these contracts. The lack of regulation and a general misunderstanding of the premise on which this investment approach is based help to fuel these arguments.
In this article I look at the various potential pitfalls associated with online binary trading and help you to become aware of and therefore avoid any potential binary options scam you may encounter.
As with any industry there will always be someone who is looking to make a quick profit from the uneducated. The arena of financial trading is one which is synonymous with such activity. Over the years many investors and traders have lost countless millions at the hands of unscrupulous dealers. Therefore when a new trading niche is launched, it can only be expected that it will be viewed with a level of suspicion.
Trading with binary options contracts first became available to the retail trader in 2008. Since this time it has grown immeasurably in popularity. Much of this growth has been fuelled by the attractive profits that are on offer and the low barriers to entry. The product is pitched as being tradable by anyone with just a few dollars to spare the ability to call the price of an asset higher or lower. As a result many people have flocked to the potential promises of high profits only to be disappointed when this promise did not materialise. And so here is the first accusation against binary options – it overpromises but under delivers.
Part of the reason why it is difficult to make big profits from trading with binary options is that it is not quite as simply as it looks. While the process of trading with digital options is simple, you will still need to invest as much time and effort into analysing the markets as you would with any alternative trading approach. It is not possible for a novice trader to last in the game for a long time without gaining a proper education in trading methodologies and learning to manage their risk.
A secondary problem is that binary brokers know that most traders will not invest the time to learn how to trade profitability. However they still advertise the ease with which high profits can be made and draw in new traders with the lure of big deposit bonuses. However these have conditions attached. Often you will need to ‘round trip’ large amounts in your account to qualify the bonus for withdrawal. This is of course done for a reason as the broker knows that the longer that the new trader has to transact on their account, the more likely it is that they will lose their deposit. This of course equals greater profits for the broker.
So what can you do to protect yourself if you want to take up binary trading? Well you need to change your mind set and accept that you are going to have to learn about the market if you want to make any money. There is no easy route to profits no matter what you read. If you are serious about getting started with binary options trading then you need to make sure you read up on the markets, stay up to date with current news and affairs and learn how to read the charts.
When it comes to opening your account you also need to read the terms and conditions on your account that are supplied by the broker. This includes finding out about any conditions that may affect your bonus. There is nothing wrong with accepting an account bonus, but you should be aware of how it will operate in relation to your account. You can of course choose to decline any bonus that is offered if you prefer.
In both knowing and accepting how the industry operates you will help to avoid any binary options scam, and will be free to focus on your trading.