We’ve always considered binary options to be more akin to gambling than investing, but it appears that there may be something more sinister going on in the binary options industry.
A binary option effectively allows the “speculator” to predict whether the price of an asset will be higher/lower than a specific pre-defined amount at a pre-defined date. For example, will the share price of Apple be over $110 on December 27th at 10:00AM. It is a “yes/no” proposition where the speculator either loses his stake, or obtains a pre-defined amount as a reward. In this regard, you can see its similarity to regular gambling.
Binary Options Could Be Worse Than Gambling
Now cracks have started to emerge in the rising binary options business that hint towards somewhat shady dealings. Recently, users of the popular binary options website BinaryOptions.net posted a forum topic that went viral claiming that one of the most popular “signal products” in the business does not actually work and that traders might lose all their deposits if they use it.
The issue is not with the binary options themselves, but rather the products and services that companies offer which help “predict” what certain equities are going to do in the short-term future and then suggests certain binary option trades as a result.
Binary options signals are nothing new, but it was 2014 when they became extremely popular, and as ever, when products and services become popular in the investing world, there is usually someone there to try and rip off the unexpecting “investor”.
The issue with this particular service is that binary options “signals” supposedly use clever algorithms in order to predict in which direction the value of an asset such as gold will move. The idea is that these algorithms will automatically sweep the charts of assets in order to discover recognizable patterns based on which they will make accurate predictions of the short-term future.
However, as the forums seem to be revealing, these products don’t seem to be working at all and most people that use them will lose all the money they have invested. One forum user comments that the further spread of these products will undermine the credibility of the entire binary options business.
However, it appears that many forum posters (who seem to be real people and real traders) do believe that there are legit binary options companies, only that the spread of these fake products called signals will greatly confuse new traders.
So what can you do if you are interested in binary options?
Be Careful If You Are Interested In Binary Options
First of all, its important to understand that this is effectively entertainment/gambling/speculation and should be well and truly segregated from your “investing” strategy.
If you are a person who is interested in binary options you will have an extremely hard time in finding those companies and products that will help you make a consistent profit and more concerning is that you’ll often find yourself getting scammed.
Just think about it – do you think these people would be giving away their secrets if they truly knew how to beat the markets and profit from 80% of their trades? Absolutely not. In that way, its just like the property seminars promising huge profits with no risk and no upfront capital. If it was true, the presenter would be doing it themselves, and not trying to convince a room of others to do it.
Its also interesting that its apparently illegal for people from certain states in the US to register at binary options brokers due to gambling laws. Yet certain brokers still seem to advertise that they accept US residents.
There is however a big disclaimer revealing that none of these companies are regulated in the United States. When investigating this I discovered that various US regulators have warned against people registering at binary options brokers but did not explicitly state that doing so is against the law.
So, even the laws are very confusing on what is allowed and what is not. This is yet another argument why you might want to stay away from these binary options.
Remember: Its A Gamble
The most important thing to remember is that the whole concept behind binary options is nothing more than gambling such as roulette and slots. You are supposed to make predictions on how the value of an asset like silver or gold will behave in the future. At the first sight this might not seem like gambling, but considering the time frames you have to use in order to get your predictions right, the whole concept of “investing” shatters away.
Most of the time you will be required to predict the correct movement of an asset within time frames such as 1 to 5 minutes, which is ridiculous. No person can do this, not even someone with inside information into markets and trading. The concept of “binary options signals”, as in, software applications getting these correct predictions for you therefore seem even more ridiculous.