Are Binary Options a Scam?
When you use a binary options trade, you actually lay a bet on whether the prices of an underlying financial asset will be more or less than a predetermined price, which is referred to as the strike price. Analyses have to be made for the time until the binary trading option expires. If you predict that the value of the asset will rise higher than the strike price, you can buy a purchase option, and if you believe that the value will decrease, you can opt for a put option. Hence there are only two possible scenarios involved in this type of trade, which gives this trading style the name binary options.
Obviously if your predictions are right, you earn fixed payout amounts of the amount of the assets on which you made the trade. However, if you are wrong, you will lose the amount of money which you spent on buying the option.
In forex markets, binary options are also referred to as the all – or – nothing trading style. This is because you either receive the full payoff amount or you receive nothing at all. Compared to other trading styles, binary options method has its own advantages in the sense that you can only loose a fixed amount of money if your predictions go wrong. The steps involved are also simple to understand and only limited risks are associated.
Despite the pros, there is one huge drawback in the entire scenario. A large number of people are not completely aware of the binary options trading style, which can cost them all the money that they invest in the forex world. As such, trades have to be executed with extreme care so that not much is put at stake. Since all the money can be lost in just a few moves, many traders do not trust binary brokers very much, and regard the entire method to be fraudulent.
Why do people believe binary trading options to be a scam?
Many people think that binary options are fraudulent, and brokers are out there only for betraying the individuals. Here is why they have these beliefs.
- A lot of traders invest in binary options without fully understanding it. Simple as it may be, it does demand some time and practice on your part before you can make accurate predictions and trade the right moves. But this is what many traders do not give. As such all the moves which they make go wrong, and they end up losing their money, which makes them feel like they have been cheated. But this is not so; the mistakes have actually been made on their part, not because of their broker or the forex market.
- In rare cases, people do actually have to face a fraud. But do you know what? There are actual several ways to avoid it; more on this later.
Scams are prevalent in almost every industry, particularly in the forex market, but there are also several different ways to avoid them. Before going onto that, one thing that needs to be cleared here again is that most of the situations which are stated as a ‘scams’ are actually not. They just occur because of any of the above mentioned reasons.
Still there are some questionable websites and brokers with a bad name on the internet, quite a few of which have sprung up in 2013. However, if you thoroughly research the broker and can find viable information and reviews on the net, you will not be a victim to any sort of scam.
Differentiating a Scam Website from a Legitimate Website
- Before you hire a broker, thoroughly go through his site and view all the information stated there. Ensure his company has a satisfied clientele and only then think about opening an account with him.
- Hire a broker that is ranked among the best brokers in 2013. You can easily find this information on the internet. A few recommended brokers are Plus500, 24Option and AnyOption. All of these have gotten excellent ratings for 2013.
- Call the customer service department and ask them questions about their companies such as the platform they use and the assets they offer.
View the ‘News’ or the ‘Press Release’ page on the website of the company. If the news seems real and can be found on other trusted websites, the company is probably not dealing in scams.