Warning about Binary Options – A form of betting

While with other financial products such as Forex, CFDs, or even shares the profit or loss is proportional to the price change, there are no different amounts with Binary Options. Either you win or you lose. In both cases, the amount is not determined by the price, but by the broker and is already fixed when the trade is placed. The same is true for simple sports bets (or bets on other events). The bookmaker sets an odds and the betting participant can bet on a team. If this team wins, the participant also wins the previously determined amount. If the team loses, the stake is lost. The same is true for Binary Options, except that here the bet is not on teams but on rising or falling prices.

Due to the high similarity to bets, Binary Options also involve very similar risks to these. Here too, many factors are incalculable. If the bet is lost, the entire stake is gone. Also, the addiction factor should not be underestimated, either with bets or with Binary Options.

Not for every trader binary options are the right investment

Binary Options are very interesting and trading is also much more fun for most investors than investing in stocks or other, more predictable forms of investment, because Binary Options usually have a very short maturity, so that there is sometimes live excitement about whether the trade is won or lost. Even if the entertainment factor should not play a particularly large role in serious investment planning, one cannot deny the Binary Options a certain attraction. This makes them interesting for investors, but no less dangerous.

  • Fixed payout
  • Fixed risk
  • Fixed time period
  • Only need 1 point movement for win/loss

Since in the case of lost trade, the entire stake is directly lost, no money should be invested in Binary Options that are actually planned for other purposes. Only capital whose loss the trader can easily get over is suitable for trading. Clients who do not have much money or for whom its loss would still be too burdensome should not trade with binary options under any circumstances, because then there is the danger of losing so much that it can become a serious burden. This is exactly what the Binary Options warning on brokers‘ websites is aimed at: “There is a risk of losing the entire deposit”. Clients should be aware of this before they decide to trade Binary Options.

High profits – high losses

Binary Options attract many traders not only because of their simple structure but also because of their high profits. With only one single trade, the user can gain about 90% of his investment with some brokers and that in only a few seconds. Hardly any other investment has such a high-profit potential.

However, the chances of profit should not be reduced to individual trade. Here the mentioned high profits are indeed possible, but no reasonable trader puts his entire capital on a single trade. If this trade is lost, and the probability of this is never small even with very good analysis, all the money is gone.

With a longer-term trading strategy, many trades are made, some of which are won and some of which are lost. With the lost trades, the entire stake for this trade is usually gone. These Binary Options losses of course relativize the high profits of the other trades because what is important is not what happens in a single trade, but what comes out at the end of the day, week or month. While these may still be high profits, they may just as well be high losses.

Dubious advertising promises high profits with little effort

Not all providers are honest and it is well known that in advertising most products are better advertised than they are in reality. Therefore, when advertising Binary Options, you should be careful. Here, the high profits are often emphasized, which are actually possible with a lot of expertise and luck, but the potential losses are only mentioned in passing, if at all.

Many beginners have already lost money because of such advertisements through Binary Options without even being aware of the real risk of this investment. If you are seriously thinking about trading Binary Options and you have the free capital to do so, you should not be blinded by such advertising promises, but look at Binary Options trading realistically, work out good risk management and set yourself a limit for losses that you will not exceed. Only with a realistic picture of Binary Options can trading with them be successful in the long run.

Consumer protection is also critical of binary options

Consumer protection authorities have been warning against Binary Options for several years. In their opinion, these contain too high a happiness factor and do not represent a serious investment. Here it can be argued against it that there are quite traders, who live from the Binary Options, on the other side there are also professionals, who live from Poker playing.

Here, similar to the Binary Options, an exact analysis, stochastic knowledge, and a very good understanding of the game is necessary, so that the high luck factor does not become a disaster. Traders should, therefore, take the binary options warning seriously and only trade them if they are aware of the risk, have sufficiently studied the trading, and can spare the money invested.

Only trade with reputable providers!

An important hint, which unfortunately still too few beginners take into account: Take a close look at which online broker you entrust your money too! Not all brokers are reputable and just because they promise high profits, you should not act hastily. Especially with Binary Options, there are many chances for good trades every day and every minute, so you won’t miss a chance if you don’t register immediately with the promising provider.

It’s better to take another close look at the offer and make sure it’s a reputable company. Good brokers do not hide the omnipresent dangers of this form of investment and have a highly visible warning about Binary Options integrated on their website. The experience of other traders can also be helpful. In our broker reviews, we have collected a lot of information about different providers.

See the list below for reliable platforms. Create a free demo account:

Broker:

Rating:

Advantages: 

Start trading: 

IQ Option logo
5/5

+ Yield up to 100%
+ Best platform
+ 24/7 support

Deriv logo
4.5/5

+ Yield up to 95%
+ Auto trading (bot)
+ MetaTrader 5

Pocket Option logo
4/5

+ Yield up to 92%
+ Bonus program
+ Accept any clients

Fraudsters often sit abroad

A broker who intends to defraud his customers usually chooses his seat in such a way that legal action is difficult and he is only bound by very loose guidelines. This is why there are many dubious providers in Caribbean island states, for example, because although they grant a license, the conditions and also the controls are much looser than in the EU, for example. Even in the event of a legal dispute, such so-called “off-shore brokers” usually have good cards on their side, because their location abroad makes them difficult to reach so that customers here usually have very little chance of success.

Although not all brokers based in more remote countries are automatically dubious, there are certainly very good providers here too. But especially for beginners, it is much safer to choose a broker with EU regulation. Good brokers make no secret about where their headquarters are located and by which authority they are regulated. Therefore, pay attention to the licensing on the broker’s website.

Bonus campaigns often promise a lot of money

Many customers forget the often-read warning about Binary Options when they hear that a broker gives them extra money when they sign up. Of course, we are all happy to discover a generous bonus offer, and with promotions where it seems that several hundred euros per customer are often given away, one is already tempted to quickly register and deposit with this provider.

Most of the bonus promotions currently available in the industry are actually not dubious. The traders make a deposit and then receive additional money credited to their trading account. However, it is not directly a “gift”, because such a Binary Options bonus usually does not come without conditions. Most bonuses have to be wagered several times while trading and many Binary Options traders have already lost money on Binary Options, so there is nothing left from the deposit or bonus.

And this is exactly the danger, which is often overlooked: Even if the bonus is on the trading account, it can still be far from being paid out. In order to fulfill the payout conditions, traders take a high risk, where they can lose their entire deposit. Thus, the brokers profit from the bonus at the end, because although traders can always meet the conditions and payout the bonus, many only pay in and never payout despite the bonus.

Calculate losses from the outset

Binary Options losses are a part of trading for beginners and professionals alike. Since prices are very difficult to predict for short periods of time, there is a very high variance in trading and even a trader who can place the majority of his trades with a positive expected value does not make a profit every day. Therefore, traders must expect losses. In extreme cases, even a good trader can lose his entire balance.

You should be aware of this when entering Binary Options trading. Do not plan the money you deposit with the broker for anything else. You might make a good profit with it. You can then cash it out. Only then can you plan the money for other things, but it is no longer available for trading. You may also lose your entire deposit. If so, you will not get into financial difficulties, because the money was only intended for trading with Binary Options.

Conclusion: Caution is advised with binary options

As we have seen, Binary Options have their dangers. Therefore they are not suitable for investors looking for a safe investment opportunity. Although high returns are possible, they also involve many risks. The Binary Options warning, which serious brokers have to publish on their sites due to legal regulations, clearly states that it is a very risky investment and the complete deposit can be lost.

This cannot be refuted, even though there are some traders who manage to trade Binary Options professionally. But even these traders are at risk because binary options are a very variable form of trading. Therefore, only money should always be invested, even if a total loss can easily be absorbed. In addition, before signing up with a broker, you should read their general terms and conditions carefully. Here you can find out which rules apply to this provider and what you have to pay attention to. Our broker comparison will help you find a suitable provider.


See my other posts about Binary Options:

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