Binary Options - What are they and how do they work?

[LoRio]

I'm sure there are some successful strategies for news trading Binary Options. The issue is that so many people have reported that extracting their profits from binary brokers is difficult, if not impossible.

Considering the automatic negative risk/reward ratio built into binary trading and you would be better off applying that news trading strategy at a decent ECN forex broker.

wanted to try that on an NFP's release.
Found a no_deposit_bonus broker . Got a call(after signup) telling me
"-The bonus is not real is demo"
"LR:Thats ok , i want to get a taste of the platform"
"-Yes but with only 50$ virtual money , you wont make a lot of trades so , deposit."

 

[Floriano]

Since Binary Options is a derivative instrument, you can only trade as well the underlying markets. If the underlying markets are bad due to volume issues or liquidity, then you’ll likely have a hard time trading as well.

 

[Pipsqueamish]

This appears to be a hot topic at the moment. I'd like to add my two pennies to the conversation without upsetting anybody who's invested in one side of the argument or another. As far as I'm concerned binary options trading IS gambling. Not just in the way that all trading detractors call it (I'm obviously not one of them), but for another reason that not many seem to be talking about. Binary options brokers are the house when you trade with them. Simple and plain. If you think they forward your trades onto an exchange or anything like that you are sorely mistaken. So just that fact (I won't talk about any of the other sneaky tricks binary options brokers ALLEGEDLY employ) is a massive conflict of interests. A business is a business and in that particular business model if you win they lose simple as that.

The SEC has released this document for anyone who is interested. I would say it's a pretty conservative appraisal but it has useful information.

This weekend I also came across this series of articles: http://www.binaryoptionswire.com/great-binary-options-scam-part-one-full-disclosure/series , coming as it does from a Binary Options affiliated website I found it quite interesting.

 

[Pharaoh]

It's double gambling.

1. You're pretty much betting black or red, except that the house edge is 15% or more.

2. You're betting that if you make money, the broker will let you withdraw your profits.

 

[Laslo]

Ok, if the binary options are so bad, what those brokers are counting on? Ticking each and every trader they will finally destroy their business at all. Especially if they will have more and more unhappy customers, who can talk about bad experience with binary. There should be at least one fair binary broker.

 

[Pharaoh]

Most seem to be counting on their being a sucker born every minute.

A few may settle for the big edge the house has, but if you win too big, remember that the house won't be enthusiastic about paying. Unlike a real casino, they can disappear and rebrand themselves in minutes and make the new site appear to be completely unrelated to the old one.

 

[Successful Trader]

I was doing binary options for some time. It sounded so attactive. Huge bonuses, not much knowledge required. But frankly I think it's more gambling than trading. And that too in a cheesy way. The brokers are mostly registered in offshores, the bonuses they provide you can never withdraw. Almost impossible and the trading which does not involve much analysis. I won't do it again. Gambling is not for me.

 

[Christopher Hubbell]

It is true that binary options brokers only pay 80% on a binary bet that closes "in the money". It's a similar proposition with many reputable forex brokers. For example, let's say you want to try to make $100 on EURUSD. Open a position with 1 standard lot with a target profit of 10 pips and a stop loss of 10 pips. Let's say the spread is 2 pips. What did that trade cost? What is the net payout? It cost $20. In this case, the payout is $80 if the trade was successful. If not then you lost $100.

 

[Pharaoh]

If one aims for small pip gains in forex, the deck can be similarly stacked. However, if you aim for larger pip gains, the spread ceases to be a major concern.

In forex, one can also adjust the risk/reward by not having the same distance on SL as TP. If someone had a 10 pip SL and a 20 pip TP, then those 2 pips of spread wouldn't result in a negative risk/reward ratio.

Better forex brokers pass trades on to the real market, so those brokers have no financial incentive to make traders lose. Can the same be said about any binary options broker?

 

[david92506]

Reputation

Most seem to be counting on their being a sucker born every minute.

A few may settle for the big edge the house has, but if you win too big, remember that the house won't be enthusiastic about paying. Unlike a real casino, they can disappear and rebrand themselves in minutes and make the new site appear to be completely unrelated to the old one.

I completely understand what you are saying and I agree with you 100%. However, it seems to me that there are several binary brokers who have spent a lot of time and energy to build a name for themselves. They also get excellent ratings at independent reviewers. It seems improbable to me that they would not pay people if they make withdrawals, regardless of the amount. Just like a casino they know that in the long run the house always wins and there is no reason to rip people off. However, it seems to me that new brokers would do such a thing because as you stated, they can just disappear and re-appear with a different name.

I've made deposits and withdrawals at one highly reputable binary broker and I've never had any difficulties whatsoever. This particular binary broker stopped accepting USA customers so I'm not with them anymore. And I haven't joined any other since.