Monday, September 2, 2013

Like roulette? You'll love binary options trading!

In the world of trading and investing, the terms 'gamble, gambling or betting' is actually offensive. There's a big difference between analyzing, and being able to explain why a certain equity will trade up or down according to your analysis, than simply betting 'up or down' without doing any proper research beforehand. Chances are that you'll lose money fast! That's the reason why usually gamblers, yes even the 'professional' ones, are out of money very soon and most consistent traders are able to sustain a decent income.

If you like roulette, you probably like binary options trading - same thing. You bet either on 'red' (up) or 'black' (down, forget about the zero), spin the wheel that spins for fifteen or thirty minutes (whenever the option contract expires, sometimes even 60 seconds!) and you instantly win or lose - cool isn't it? All that without the cigar smoke from the guy standing next to you in a casino. I pretty much briefly explained the concept of binary options trading just now, you place your bet: either 'up' (call) or 'down' (put) on a certain underlying asset like a stock, commodity, forex or etf - wait patiently for thirty minutes, because that's may be how long it takes for the big and mighty binary options trading spinner to stop (every binary option broker has its own rules about expiry and no, you can't exit sooner) and you either win or lose - simple as that! It doesn't matter if your underlying security spiked up or down during that time frame, what matters is where the price is at the end, when the option expires.

Binary Option Trade example for EUR/USD

As you can image there's a huge risk/reward ratio, and just like with roulette you might win a few times - but the bottom line is that it's almost impossible to make a living (or a consistent profit for your portfolio) playing roulette, eeh.... I mean trading binary options. The odds are essentially always in favor of the house (broker). Binary options brokers are deceptive, usually have very professional designed websites and present you with the 'tools that make you money'. I've been approached several times by various of those binary options brokers via VDM trading, asking me if I could help promote their financial product by posting their articles on this site, in some cases for quite a bit of money. Since I only endorse and advocate sound investment advice, the ones that will hopefully help you make the right investment decision, and is more geared to the long term, I immediately declined. I've been trading for many years, and when it comes to trading binary options I can tell you this: don't do it! Don't even allocate a small percentage of your portfolio to this relatively new 'trading' concept, and claim it's part of your diversification, it's just not worth it.

Is binary options trading a scam?

Despite what I wrote above, generally speaking binary options trading is not a scam. Of course I don't know all the brokers out there, some may be more questionable than others - therefore it's a good idea to open a demo account first or carefully read the fine print if you do decide to trade binary options. The bottom line is that just because this form of trading carries a tremendous amount of risk, so much that it can be even compared to gambling, doesn't automatically mean it's a scam. A scam usually is something that is a rip-off, takes more money from you than you invested, or something that doesn't show the whole picture. The action of trading mini-option contracts that can even expire within 60 seconds is what it is, you know beforehand what the risks are, and what the possible rewards are. Therefore I cannot classify binary options trading as a scam.

Conclusion

Play roulette, it's a lot more fun, doesn't have any hidden fees and you might meet some interesting people.

Disclaimer:

All opinions expressed, trade recommendations/advice on this website are solely of John van der Munnik and are not affiliated with any investment firm or any other organization. You should not make an investment only based using this website VDM Trading for your trading needs without seeking help from your own financial advisor.