Binary options are recent financial instruments in which investors make money by speculating the future price of various underlying assets such as stocks, commodities, Indices, forex currency pairs etc. Since it’s a new investment technique, some people are not sure whether it’s a legitimate investment or a scam. The simple answer to the question of “Whether binary options is a scam or not?” is, it depends on the broker you choose.
Binary options are definitely a legitimate method of investment and you can really make money by trading binary options. But there are certain fraudulent brokers that deceive traders by pretending to be legitimate brokers and steal all your money. You should be careful about such fake brokers and only open trading accounts with genuine, Regulated and licensed brokers who don’t charge any hidden fees or commissions. Some investors who opened their accounts with fraudulent brokers have lost their money, because of which other investors are also having a false assumption about binary options and consider it as a scam. In order to find out the list of genuine brokers available for trading binary options, you should go through the reviews of various brokers online and also read their customer testimonials to determine if they are legitimate.
When you invest in binary options, you usually bet on whether the value of underlying asset will reach above the pre-determined strike price at the time of expiry of the option or not. If you anticipate the price of asset will go above the strike price, you will choose a call option and if you expect it to fall below the strike price, you will choose a put option. Binary options are also called Digital options or “All-or-Nothing” options because it can result only in 2 possible outcomes as below,
- Your prediction is correct and you will win the trade. In this case you will receive a fixed return which can be either cash or certain percentage of the asset which you will know at the time of placing the trade.
- Your prediction is wrong and you lose the trade. You will lose all the money you had invested for that particular trade to purchase the option.
Binary options trading is regulated and supervised by government regulatory authorities and is offered by certain legitimate brokers in various countries across the globe. Already plenty of investors are able to successfully make money through binary options trading. In order to make money through binary options, careful analysis of market trends is very important so that you can accurately predict the value of asset at a future time frame. When you trade with regulated platforms, you will get real-time news feeds and live quotes of various stocks which will help you understand the market conditions clearly. But if you open a trading account with unregulated or fraudulent brokers, they will use certain tools to manipulate the market data according to their favor and investors can get deceived by such false newsfeeds. Since investors choose the strike price and expiry time only based on the market news, such false data can result in their predictions to go wrong and ultimately they will lose all their money. So you should be very careful before opening an account with any trading platform.
Also some brokers charge hidden fees and very high commissions for each trade which is a huge disadvantage for investors. If the broker charges commission based on the total value of the contract, then investors will have to spend lot of money on commissions. Regulated brokers will charge only fixed commissions for all contracts regardless of its value. Regulated brokers will also offer educational videos and tutorials for beginners to learn about binary options trading. They will not advertise any get-rich-quick schemes or illegitimate methods of investment. If the broker you are planning to open an account with is promoting such get-rich-quick schemes, you can be sure that they are fraudulent.
With binary options there is no guarantee that you will always succeed in the trade. It all comes with trading experience and market knowledge. If you understand the market trends and read the technical indicators such as charts and graphs carefully, you will be able to speculate the asset prices more accurately and gain as high as 85% return on your investment. To conclude, binary options trading with regulated brokers are legitimate and are considered as one of the safest methods of investment due to its low risk profile and higher returns.