Why It’s Unlikely You Will Make Money In Binary Options

Why It’s Unlikely You Will Make Money In Binary Options

Binary options, for those who still have no clue what it means, is the newest trend in the global financial markets. This type of trading puts the “investor” (speculator) in an all-or-nothing position, whereby they are rewarded only if their binary option stock hits a certain value. Binary options is based on a simple trading concept that appeals to many while at the same time blinding them to the reality of immense risks this form of financial speculation brings with it.

Although inherent within this mode of trading is the reality that the trader will end up losing money, many people still choose to try their luck. The worst part is that the risks of losing money do not end with the broker having an edge over you in every trade you make.

There are other factors that commonly play a role in lowering your odds of making any money in binary options trading further.

Unregulated Brokers Have No Obligation To Protect Your Rights As A Trader

Binary options brokers are popping up left and right as the binary options trading fad catches on. However, some of these brokers are operating without proper regulation. In some cases, a broker that is officially recognized in one region may be unrecognized in another region.

For instance, the unusually stringent US regulations when it comes to Forex and binary options brokers means that brokers that can operate legally in other parts of the world cannot operate in the US within the law.

However, there is also the issue of a broker who is not regulated anywhere in the world. Such a broker has no legal obligation to protect your rights. This means that whenever an issue arises where your interests conflict with the broker’s, you will always be on the losing side. So, you will be less than likely to make any money from your binary options trading.

Sources:

http://www.optionsadvice.com/brokers/

http://www.binarytrading.org/is-binary-trading-legal-in-usa/

Some Brokers Play By Their Own Rules

There is another reason why you should give a broker who operates without any kind of regulation a wide berth if you will still dare to test the murky waters of binary options trading. This is simply because such a broker does not follow any recognized regulations.

Even in cases where a close look at such a broker’s regulations indicates that a trader’s rights are taken care of completely, there is no guarantee that such a safety net will remain in place. The broker can change the rules at any time, and in such cases you can end up losing your money unjustly.

As a binary options trader, you also have little to no legal redress in case a broker goes rogue and decides to take away your money by changing the rules.

Unfortunately, with the large number of unregulated brokers that are also quite popular, that only means that people are likely to lose money from binary options trading, even if they are able to overcome the extremely unfavorable odds inherently built into the binary options trading systems.

A Broker Can Offer Trading Services And Also Bet Against You

This may not make sense to some current or would-be binary options traders, since most of them assume that the fees and commissions they pay to brokers should be enough to make them obligated to protect their funds as well as their interests as traders.

However, nothing could be further from the truth. Some of these brokers are also market makers, which means that they stand to benefit directly from any losses you make from trading in binary options in addition to commissions or fees.

Sources:

http://forums.babypips.com/binary-options-futures/53497-how-brokers-make-money-binary-options.html

http://www.binaryoptionsinvestor.net/hows-brokers-make-money/

Many Brokers Offer Poor Quality Trading Experiences

Binary options trading is a relatively new field. Understandably, many brokers have been in the field for a limited amount of time, which means they lack the experience or the resources to offer good quality trading conditions.

For instance, some binary options brokers offer unfavorable demands when it come to deposits, the trading interface, signal sources, support system, or even transparency in the way they conduct their affairs.

In fact, many traders have lost money because there were delays in relay of price signals, poor customer service or unusual trading terms. This problem is actually more rampant that most people think, since there is a very short list of brokers that offer conditions that favor smooth trading.

Essentially, this means that there are several chances for you to lose money due to problems with the level service a broker provides.

Conclusion

Even without the problems of unregulated, rogue, or unreliable binary options brokers, putting your money in this financial market is a loser’s game from the very start.

The odds of winning are against the trader at every turn. However, when issues such as regulation are thrown into the mix, the risk of losing money is magnified greatly. For one, unregulated brokers are not answerable to anyone if they violate a trader’s rights.

Additionally, some brokers make their own rules, bet against you, and offer poor quality trading conditions that result in disputes that are generally resolved at the trader’s expense, further lowering the chances of making money from binary options trading.

Additional reading:

http://www.investopedia.com/articles/active-trading/061114/guide-trading-binary-options-us.asp

http://www.forbes.com/sites/investor/2010/07/27/dont-gamble-on-binary-options/

http://www.sec.gov/investor/alerts/ia_binary.pdf

 

Facebooktwittergoogle_pluspinterestby feather

2 comments

  1. Lots of good sources here. I get a lot of spammy emails etc. about it binary options and I wondered what it was all about. I have stayed clear…..
    May recently posted…Personal Finance Can Be Delightfully BoringMy Profile

Leave a Reply

Your email address will not be published. Required fields are marked *

*

CommentLuv badge