An Introduction To Binary Options

People are often looking for ways to invest aside from buying stocks, and one method that sometimes comes up is binary options trading. This is a method of trading that can still involve typical stocks and other assets (like gold, oil, etc.), but it tends to be less about long-term investment and more about a short-term guessing game. Here’s a little bit about how it works, whether or not it’s reliable, and how long it may continue to be an option for traders.

How It Works

Binary trading is about trying to predict the value of an asset at the end of a given time frame. Because of this, it is often compared to gambling, or more specifically sports betting. When you bet on a sporting outcome, you’re wagering a given amount of money in the hopes of winning it back, plus a predetermined commission, if you’re correct; typically, if you’re wrong, you lose the entire amount you wagered. This is how binary trading works, and in fact is why it’s referred to as “binary,” suggesting an all-or-nothing outcome. To give an example: if the price of gold is about $1,277 (as it is at the time of this writing), investing would mean buying a given amount at that price, and hoping to sell that amount once the price inflates, profiting by the difference. In binary trading, however, you might “bet” that the price will be at $1,280 by the end of the week, collecting a profit only if you’re correct and otherwise losing what you bet.

Is It Gambling?

This is a question that comes up frequently with regard to binary options, and it’s certainly fair to ask. The sports betting parallel, for instance, makes it seem more like a game of chance and less like an investment. However, this isn’t entirely fair. Going by the actual definition, a lot of what we do in daily life is gambling, including more “ordinary” forms of investment. There is always a risk, the potential of a reward, and chance in between. The binary nature of this type of trading can certainly make it feel a little bit more like what we think of as a wager. But really, so long as traders make strategic decisions based on market trends and up-to-date information, this isn’t significantly more like gambling than any other form of investment.

Is It A Scam?

It doesn’t have to be gambling for it to be somewhat crooked, and unfortunately there have been some indications that popular binary trading platforms do actually scam their customers. Just recently it was announced that Banc De Binary would be closing, and it appears that one reason why is that this firm (and others like it) built independent platforms to determine the prices of assets and occasionally manipulated them to ensure customer losses. People have plenty of reasons to complain about corruption in ordinary financial markets, but nothing so blatant as this tends to happen in stocks. It has been compared to the ways in which casinos rig games, or at least weigh them heavily against customers.

Is It Going Away?

Right now there is no indication that binary options trading will completely go away. However, there have been strict bans and penalties that have at least limited its reach. Binary trading is outlawed in the U.S., and could conceivably be banned in additional large countries with major economies in the future. For now, however, it remains and option for those who want to give it a shot despite clear evidence of rigging against customers.

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