It's no secret that today in the ranking of all kinds of earnings on the Internet, binary options are far from the last place. Some consider them to be an excellent option to quickly increase an investment deposit, while others, on the contrary, are the best way to get rid of it.
Some consider them to be an excellent option to quickly increase an investment deposit, while others, on the contrary, are the best way to get rid of it, as in terms of popularity, they are quite comparable to many derivative exchange instruments.
Why opinions about binary options differ so much and how realistic it is to make money on them, we will try to figure it out in the course of this article.
- Binary Options — Scam or Not
- What are Binary Options
- How to Make Money on Binary Options
- Binary Options: Learning
- Binary Options: Trading Strategies
- Rating of Binary Options Brokers
- Binary Options Brokers
- Reviews About Binary Options
Binary Options — Scam or Not
People who are poorly familiar with this topic most often consider binary options to be one of the types of trading on exchange-traded assets. However, there are fundamental differences between the two.
And since we are talking about bets, it is not difficult to come to the conclusion that the trading platforms of binary options brokers are based on the casino principle - sometimes they give to win, but in general they are set up so that most clients end up at a loss.
Watch the video of what an active trader thinks about this:
Are Binary Options a Notoriously Losing Instrument?
Unlike margin trading, where the user can get 100%, 200%, 500% or more percent of the profit from one transaction, such numbers do not exist in binary options.
As you can see, the rules are not entirely fair, since one winning trade is not enough to compensate for one losing trade (with the same bet size). And it is not at all difficult to calculate that in the long term, binary options trading is a game with a deliberately negative mathematical expectation.
For example, you make 100 trades for $ 10 each. If, at the same time, a forecast is made arbitrarily without a well-thought-out trading strategy, as is the case with most beginners, then, according to the theory of probability, the ratio of profitable and unprofitable bets will be approximately 50/50 (as with a coin toss). In this case, losing trades will cost you $ 50 * 10 = $ 500. But for winning bets, the result will be slightly different - $ 50 * 8 = $ 400 (multiply by $ 8, assuming that the option premium is 80%). In total, after 100 trades, despite the equal number of wins and losses, you will still be at a loss of $ 100.
A wonderful scheme, isn't it? That's just great for a binary options broker, but not for his clients.
Trading Options is Like Skating On Thin Ice
In addition to the fact that the trading premium is always lower than the potential loss, there is another unpleasant moment in binary options associated with this parameter.
The fact is that the percentage of profitability can vary depending on the selected asset, the volatility of its rate and other factors. Moreover, for many brokers this can happen at any time, even after opening a deal.
This means that the rate, at which at the beginning there was, for example, 80% profitability, by the time of expiration may well “blown away” to 20%. It turns out that the trader seems to have made a profit, but its size is not particularly pleasing. Especially when the bet was made with the expectation of covering a loss of a specific size from past transactions.
Also, on some platforms with binary options, asset prices can be manipulated. After all, no matter how much they say that prices are read in real time from third-party exchanges, such sites are always an internal "kitchen" where you can do whatever you want.
For example, when a client of a binary options broker begins to make noticeable success in trading, a so-called "slippage" mode may be activated for him. At the same time, right before expiration, the rate makes a sharp jump to the disadvantageous side, because of which the transaction is closed at a loss. The deviation occurs for a very short time, and the price immediately returns to normal, but this no longer plays any role.
For such situations, brokers always have a prepared answer in the style of "there was an uncontrolled jump in liquidity on the supplier's site." That is, the blame is shifted to a third party (often non-existent) and the trader is given to understand that he will have to come to terms with what happened.
Of course, not all binary options brokers use the described methods, but those of them who play foul play are enough to ruin the reputation of this entire industry.
Will it be Possible to Withdraw Earned Money on Binary Options?
Even if the user is able to adjust to the peculiarities of the terminal of his binary options broker and starts trading with a profit, another unpleasant situation may happen to him.
We are talking about withdrawing money from the account balance - if these are small amounts, most often there will be no problems. But in case of receiving a decent income, many times higher than the initial deposit, the withdrawal may well be frozen.
There can be quite a few reasons why brokers block money withdrawals.Most often, the client is informed that premiums on successful trades were received as a result of a “technical failure of the trading system”. He can also be accused of "discovering an error in the operation of the terminal and using it for his own enrichment."
There may also be a requirement to prove the origin of the funds that were used for trading. Although common phrases like “You violated the terms of the user agreement” are often heard, without specifying what exactly was violated.
The worst thing about these situations is that there is essentially nowhere to complain. Most often, binary options brokers are registered in the offshore countries, so they are not subject to the influence of local regulatory authorities.
A complaint can only be filed with one of the international commercial organizations that resolve disputes between traders and brokers, for example, Finacom. However, their instructions are rather advisory in nature.
This means that even if the broker's actions are found unlawful, he can still ignore the decision of the regulator and not return the money to the client. In such cases, Finacom “shrugs its shoulders” and simply publishes the fact of accepting the claim and making a decision on it on its website.
What are Binary Options
A binary option is a financial instrument with which you can get income (or loss) as a result of fulfilling (or not fulfilling) a certain condition by the end of a predetermined period (expiration date). Most often, we are talking about the fact that the price of an asset will rise above or below the opening level of the contract.
For the first time, binary options appeared in 2008 on the Chicago stock exchange Cboe. However, they became officially recognized as a financial instrument only after in 2012, the CySEC (Cyprus Securities Commission) began to issue licenses to brokers to provide relevant services. Today, binary options are considered a derivative for short-term trading, but in terms of the level of risks present, they are equated to gambling.
As a rule, the amount of premium that a user can receive when trading options varies depending on the selected asset, the rules of a particular broker and the volatility of the rate. The amount of possible income for binary options does not depend on the degree of change in the value of the asset.It is fixed at the time of opening a deal and usually does not exceed 80–90%.
Most often, on sites where you can trade binary options, the following types are found:
- (Call / put) — classic options in which you need to place a bet on the price movement in one of the directions relative to the rate at the moment the order is opened.
- (One touch) — a prediction is made for the rate to reach a certain level during the duration of the transaction (while further price change does not solve anything).
- (In / out) — a bet that the price will be within (or go beyond) the selected price corridor by the time of expiration.
How to Make Money on Binary Options
How to make money on binary options:
- Select a broker that supports this trading instrument.
- Decide on the type of binary option and the asset, the rate of which you can predict.
- Weigh the risks and open a deal, waiting for a convenient moment
- Wait for expiration to lock in profit.
In fact, everything, of course, turns out to be not so simple, because in order to conduct profitable trades with binary options, you need to take into account quite a lot of nuances.
First, when choosing a broker, you need to pay attention to its reliability in order to reduce the risk that you will not be allowed to withdraw funds based on the results of trading. Preference should be given to those sites that have been on the market for a long time, have a license from financial regulators and have a good reputation among traders.
Also a plus will be the presence of awards from well-known brokerage events. You can also study the ratings of brokers compiled by major thematic publications and sites. One of such lists is present a little lower in the text.
You cannot choose a point to enter a deal at random, since in this case trading will turn into a game of roulette. Therefore, first you need to go through at least basic training (often present on the broker's website), and also study and choose a trading strategy that is most suitable for the current situation on the chart. Their varieties will be presented in the following subsections.
In addition, ready-made signals can be used to select a trading pair and a trade entry point — sometimes they are found in the functionality of brokers' websites, but most often you have to turn to third-party services. Usually such services are paid and, unfortunately, rarely contain really effective analytics and advice. Therefore, it is still better to undergo training and make decisions about entering trades on your own.
Another important point when trading binary options — you should adhere to financial discipline and not invest the entire deposit in one transaction, even if it seems to be 100% winning. Ideally, to open an order, you need to use no more than 5-10% of the funds on the account, so that in the event of a loss, you still have many chances to cover it.
And, of course, you cannot enter trades when you are in an unbalanced emotional state, for example, when there is anger due to a large loss and you really want to quickly "recoup" (tilt).
Binary Options: Learning
Given the passions described in the previous sections, it would hardly occur to anyone that binary options can be dealt with without preparation. Unfortunately, this is rarely suspected by newcomers, whom brokers lure with colorful advertising materials on the topic of how easy and simple to trade options. In this case, of course, we will not talk about trading, but about betting in the hope of luck.
To trade binary options and not rely on chance, it is imperative to study the basics of technical and fundamental analysis and familiarize yourself with popular trading strategies. Fortunately, there are plenty of options where you can get all this information.
If you type in the phrase "binary options training" into Google, the search results will show all kinds of seminars, courses and even schools. Most of them will be paid, so if you are not ready to invest financially in obtaining such knowledge, you can find training videos on YouTube. You can also do self-study by studying books on technical analysis and stock trading.
Regardless of the source chosen, while studying the principles of trading, it is advisable to immediately apply the knowledge gained in practice. For this purpose, most brokers provide their clients with the opportunity to trade binary options using a demo account, so that they can hone their skills before risking real funds.
Binary Options: Trading Strategies
As already mentioned above, in order to make money on binary options, you need to open trades, adhering to certain trading strategies. In most cases, familiarize yourself with them and choose the most effective ones during training, and not only regarding options trading.
The strategies used by exchange traders can be quite successfully applied.
Effective trading strategies are based on the use of several technical indicators at once in combination with graphical analytics (interpretation of figures, candlestick patterns and patterns on the chart).
For example, a combination of their RSI, Bollinger Bands and MACD indicators works well on short timeframes. Ideally, you need to wait until all three indicators show a trade entry - RSI is above 70 or 30, candles on the chart pierce the boundaries of Bollinger bands or confidently cross the moving average, and MACD indicates a trend change.
In addition to trading strategies based on the analysis of the chart and indicators, additional tactics are often used to mitigate risks. For example, on sites where there is a possibility of early closing of a deal with a partial loss of the original rate, you can use the price lock method. It is based on the opening of two transactions at once for the same asset for the same amount, but in different directions.
As a result, when the rate confidently shifts in favor of one of the open orders, the second one closes ahead of schedule and the trader fixes a small loss. But on the second deal, he receives a premium, part of which covers the losses received. For example, both price lock orders are opened for $ 20. One of them closes with a loss of 20% (–4 $), and the second brings a profit of 80% (+ 16 $). Total, net profit is 16 - 4 = $ 12 (60%).
For example, the Martingale method, based on the implementation of the principle of the theory of probability, which states that a player cannot infinitely receive a loss and sooner or later will make a successful bet.
In this case, a twofold increase in the transaction amount is applied after each loss, up to the receipt of a profit that will cover all previous losses. In this case, the initial trade is opened for such an amount that the trader has at least 10-15 doublings in stock before the entire account balance ends.
In the case of binary options, you have to use a modified martingale method with an increased coefficient (x2.2 and more), since upon successful completion of the transaction, the profit will be a maximum of 80–90% of the bet, but the loss will be equal to 100%.
Also, in addition to martingale, d'Alembert, Fibonacci and Labouchere betting systems are used with varying success when trading binary options.
We also recommend watching a video in which a trader talks about a binary options trading strategy:
Rating of Binary Options Brokers
Below is a ranking of the best binary options brokers:
- Olymp Trade — has been working since 2014. Popular with traders from all over the world, especially in the CIS. Winner of the "A" category certificate from Finacom.
- Binomo — popular among traders from 130+ countries of the world. Since its launch in 2015, it has won numerous prestigious awards at the Forex Expo Awards and IAIR Awards.
- Alpari — one of the oldest brokers initially targeted at the Russian-speaking audience. Now it serves over 1 million users from 150 countries.
- InstaForex — has been working since 2007. Has about 7 million active users worldwide. Winner of more than 30 different financial awards, in particular "The Best Forex Broker in Europe".
- Binary is one of the oldest binary options brokers in the world. Submits to several financial regulators at once. Licensed by the UK Gambling Supervision Commission.
- 24option — has existed since 2009, mostly popular in Europe. It has repeatedly received various industry awards. The total number of clients is more than 10 million people.
- Finmax has been on the market since 2015. Owned by the British company Morris Processing Ltd. Has a reputation as the broker with the fewest complaints about withdrawal problems.
- Binarium is the first binary options broker launched in Russia (launched in 2012). Popular in the CIS. The number of clients has recently exceeded 1 million.
- IQ Option is a fairly popular broker in the world, launched in 2013. Has a CySEC license. He was one of the first to introduce Runet to binary options.
- Expert Option — has been operating since 2015. Serves clients from 150 countries of the world. It is popular due to its professional trading platform and a variety of options types.
Binary Options Brokers
The most popular and reliable binary options brokers should be considered in more detail.
Olymp Trade binary options trading platform was launched in 2014. Initially focused on Russian-speaking traders, but eventually gained popularity all over the world (more than 20 million clients).
Since 2016 he is a member of the International Financial Commission FinaCom.
Today, Olymp Trade's turnover exceeds $ 170 million per month. The minimum deposit is $ 10. The premium is up to 92%. Only classic up / down options are present.
Today, Olymp Trade's turnover exceeds $ 170 million per month. The minimum deposit is $ 10. The premium is up to 92%. Only classic up / down options are present.
A popular binary options broker launched in 2015. Currently works with clients from 133 countries of the world (not available in Russia since 2019). About 40,000 people trade options daily on Binomo.
The minimum deposit is $ 10. You can trade only classic up / down options. Profitability — up to 90%.
One of the oldest forex brokers in the CIS (exists since 1998). In 2013, he added binary options to his platform.
Today this trading tool is used by more than 1 million traders from 150 countries of the world. Since 2019, he has not been licensed to provide services on the territory of the Russian Federation.
There are 6 types of binary options for the trader to choose from. The minimum deposit is $ 1.
One of the brokers that became popular long before they started providing binary options trading service. Launched in 2007. Today it has more than 260 offices in all corners of the world. Regulated by the British Virgin Islands Financial Services Commission (FSC).
Options are present only standard "up / down". The minimum deposit is $ 1. The yield is up to 82%. The number of trading pairs is 72.
Pioneer of the binary options market. It has existed since 2000. In 2007 he received a patent for options trading in the United States. In subsequent years, it expands access to this trading tool for clients from almost all over the world. Winner of numerous prestigious industry awards.
The current base of active clients is over 175,000.
There are 3 types of options available for trading. The minimum deposit is $ 5. Profitability - up to 75%. There is a possibility of early closing of transactions with a return of up to 50% of the rate.
Reviews About Binary Options
Due to the specifics of this trading instrument and the bad reputation of many brokers, most of the reviews about binary options on the network are negative.
First of all, many complain about the interference of brokers in the history of trade transactions, cancellation of them retroactively or generally cancellation of successful orders.
Also, there are often reviews that talk about draining large deposits and blocking withdrawal of funds under various pretexts.
In some cases, with the help of lawyers, people still manage to get their money back. But judging by the fact that such reviews are extremely rare, very few are lucky with a refund.
But there are also such reviews, from which it becomes clear that it is quite possible to make money on binary options if you undergo training, develop an effective trading strategy and work only with reliable brokers.
As you can see, there are different reviews, and their content depends both on the policy of binary options brokers and on the level of preparation of users for this type of trading.