Although the term itself may scare many people, binary options are actually a very simple financial product to understand. Booming for some years now, this type of investment has attracted a lot of individuals who wished to invest in stocks in order to quickly realize profits.
But can you really make a fortune with this product? What is he hiding behind this facade so attractive? Scam or good plan, let’s take a look behind the scenes of this new type of trading …
The application binary options
Currently almost everyone knows this financial instrument and its operation. For those who do not know, the principle is simple: the trader chooses an underlying asset (currency pair, indices, stocks or commodities) and must simply judge the direction it will take. Two possibilities are open to him, the rise or fall.
Unlike traditional trading, binary options involve a variable that does not exist in the first: maturity. Indeed, your trade to an expiry date which will define if your previous choice was correct. If this is the case, you’re winning and you get your well summed up the initial yield of the selected assets, which generally varies between 75% and 85%. If you were wrong, you lose your entire investment. You will certainly understand that this product can make you generate profits or very significant losses in a short period of time; in other words it’s all-or-nothing.
Are they advantageous over conventional trading?
Yes and no. As with any financial product, binary options have advantages and disadvantages. From a purely theoretical point of view, binary options are much more profitable. Here, time is a key factor; with very short maturities available (5 or 10 minutes) or even sometimes minimal, with the appearance of recent options 60s, so it’s easy to imagine all the money he can raise in a short time , which is not possible in conventional Crosses.
But what is now a mathematical point of view? Knowing that you invest a certain sum of money, you risk losing 100% of your bet if your judgment is wrong and has recovered only 85% of it if it is correct. You will therefore clearly at a disadvantage compared to the ratio gains / losses. This is why, in principle, you still win more than half the time in binary options. In Forex, be right half the time is more than enough to sustain its gains.
Now let us take a concrete case to support this statement: Suppose you make 1000 trades made with equal € 10, each of them displaying a remunerative rate of 80%. Well aware that you will succeed in at least 556 to show a profit. In other words, the success rate of your strategy must necessarily be greater than 55.6% for your account to remain positive. Technically, if we take the previous example, by having this percentage of success will clear you absolutely ridiculous profit of 8 € compared to the exorbitant trade volume which stands him € 10,000. To be profitable in the long term, so it is imperative to have a level of success above 70%.
A revolutionary product?
The binary options have risks as gains or losses incurred . However, you will know at any time, in a position paper, the amount invested, your hopes and your earnings potential losses at the end of your contract. More puzzle to count the number of lots, to calculate the take-profit or estimate your stop loss! But the question that remains unanswered is: is it much easier to win?
The answer is no. Under its basic tunes, this financial instrument is provided easy to use. It requires, like his colleagues, a well-developed technical analysis and understanding of even more stringent charts. Here, the time you require maturity can be your friend or your enemy, you are constantly subjected to his law. This is often why Forex traders have long disparaged this product, for its lack of freedom of action.
Many have nevertheless launched an assault, some completions neophytes in the matter, other more experienced, had to spend their trader, but the fact is that many of them have failed. How do we explain it? Well for novices, this is probably explained because of too much precipitation, envy disproportionate to earn money by any means, trades the feeling, no based on any chart analysis without strategy or proper money management, the options have been right in their wallets.
But when is it traders with a past in the traditional trading? Although the vast majority of them inexorably defames this new instrument, some still wanted to try it but many are also burned it wings. Indeed, the classic Forex and binary options are similar in many respects, but they are nevertheless two very different financial products with their respective specificities. The same strategies and analysis on each of them so we can not apply in the hope that it works and many are consumed preview after their accounts. For example, technical analysis of a typical trader is performed on a time frame in H1, H4 and D1, while the binary options require a study on the m1, m5 or m15 in general. We must therefore learn to adapt and change its working methods and analysis to understand this instrument and draw maximum benefit.
The dark side of binary options
Are binary options scam? This is the question that everyone is asking for a long time and although many believe that this is the case, the answer is no. So why are frequently considered as such? The answer that follows is not from the concept in itself but the means by which a trader conducts its operations: the broker.
Do we have to face facts, the vast majority of people who tradent, or at least tried, binary options is done because of viral advertising that roam increasingly online. These advertisements praise the product on property aspects: firstly they tout their apparent simplicity and provides a key method in hand ready for use and real-time examples of that by voluntarily displaying their accounts abundantly filled thousand euros (see: scam binary theorem ). Casually, their ads are very well developed from a marketing point of view and have a strong impact on their recipients because they impress on different specific points: ease of use, easy to understand instructions and to in practice and especially the opportunity to earn astronomical gains over a short period.
Unfortunately, for those who believe in this false advertising, their dreams have become nightmares because they have made themselves trapped. Indeed, these announcements are made by dishonest and unscrupulous brokers who are not afraid to publicly display their own image to attract gullible and naive people. Therein lies the scam. Brokers who are really his and what is their purpose?
To find out, go back a few years back to the days when online casinos were booming. Many companies have emerged at this time in order to exploit this lucrative market. Business was good for them until the law gets involved to ban online casinos, dominated by too many cases of swindling and fraud of all kinds, thus ending their future that is yet announced glorious. Nevertheless, these companies, most of which have taken up residence in Cyprus because of their tax haven that exempt them from many very costly taxes, have not thrown away the key under the door and took the opportunity to be recycled into a new flourishing Eldorado: binary options.
The first to set the trend are now known as the international reference in terms of scams in the financial world of binary options: XP Markets and IkkoTrader . Two monsters, greedy, with no ethics, devoid of all moral sense and with a single goal: to fill their pockets with your money. It’s simple, every euro invested is lost in advance and that, regardless of your results, you will see it again. The first so-called “brokers” have therefore bring with them, cases of fraud and scams over the years, which obviously contributed to tarnish and taint a product which, at the base, n ‘ had done nothing wrong.
That said, these precursors unscrupulous have created two new types of companies specializing in this area. The first case includes all dishonest brokers who abuse their customers, but more indirectly and suave manner, making sure they do not suspect anything. This often leads to hidden spreads, quotation price changes, bonuses applied without prior request, conditions unachievable withdrawals, shopping aggressive incentives to follow their trading signals to traders or suggesting methods will fail as the martingale for example.
The second group, the most serious and viable now are those that are complemented by a licensed and recognized by the authorities. They invest in training in order to help beginners to progress and adapt to the world of finance and do not apply any of the aforementioned methods that were designed to steal customers. Though still few in today’s day and with still some imperfections, these are real operators who offer a serious opportunity to make a profit. It is thanks to them that the image of the binary option has regained some of its luster.
What can we conclude?
It is now time to take stock of the current situation of binary options. As we have seen, many people were fooled and trapped their knowledge by dishonest brokers, others have failed because of their greed for money or their egos. However, this instrument are nevertheless an interesting product to trader will do this only by its ease of operation and the ability to harvest large profits in a short time. Few are still those who have successfully coaxed the animal and operate for a living but, the truth is that more and more people learn, learn and grow each day a little more.
Some killjoy and you still say that you can not always make a good analysis of such small units of time; other more adventurous, if acharnerons and ultimately find the solution to this problem. What is certain is that binary options can be profitable if exploited properly. But this implies a sharp technical study and adapted to the context and much work, effort and willingness on the part of those who aventurerons in this hostile environment because do not forget that whatever the product processed, the world markets will always merciless towards you and will make no gifts.
Binary Options For Dummies 