This may appear to be a strange post coming from me (most of them of late are I guess) but I feel I need to make our community aware of the latest ‘fad’ (‘scam’???) in markets. I’m quite surprised that this has only been mentioned once on BabyPips as far as I can remember and if I remember correctly the poster never got any answers and I ‘stayed out of it’.
But this morning I just happened to ‘mosey on over’ to AskPips.com and answered a question about trading platforms (the only reason I answered was because, from her profile picture, the person asking the question, was ‘not too shabby’) and underneath her post I saw that somebody had suggested to her to go and look at Binary Options.
Now let me tell you from (demo) experience: if you think that trading (FOREX or anything else) is ‘gambling’ you ain’t seen NOTHIN’ yet. I found out about Binary Options last year when I was TRYING to set up a training school for our ‘less fortunate’ (it’s a long story) and at the time a lot of my ‘students’ discovered these Binary Options. Of COURSE: instead of wanting to learn to trade and when being told that they’d probably have to hold a trade for a few days to make a profit (maybe even a few weeks or even a few months) my training courses ‘never stood a chance’ because Binary Options offer huge gains on very short ‘timeframes’. What’s more: the amount of profit is known up front and so is the cost of the Binary Option (which really represents your loss if the Binary Option expires ‘out of the money’) which is fair enough. There’s nothing wrong with the CONCEPT and as a matter of fact: if you do a bit of research you’ll quickly find that they are legitimate trading vehicles and a method of limiting risk on ‘normal’ trades e.g. you may go long a certain instrument but ‘hedge’ the position using a Binary Option the idea being that if your ‘normal’ trade goes awry the Binary Option will expire ‘in the money’ and thus your loss will be reduced. Of course: if your ‘normal’ trade is profitable then you will lose the cost of the Binary Option thus reducing your profit (but as we know: a small profit is better than a HUGE loss). As a matter of fact: the CBOE of all places offers Binary Options!!! So far so good. But NOW ‘enter the Binary Options Brokers’ and the picture changes somewhat!!!
To prove a point (last year) I opened demo accounts with a lot of Binary Options Brokers. To be honest and if everything was run legitimately: a short-term trader (somebody who’s a ‘whiz’ at being profitable on short timeframes like the 15-minute timeframes) should be able to make a small fortune because really all you’re doing is predicting where price will close after a 15-minute period. So if you can read a ‘normal’ chart (all Binary Options charts are web based and are our equivalent of tick charts or possibly 1-minute charts) you should be able to make a ‘killing’. But HERE’S the problem!!! It didn’t matter WHAT Binary Option Broker I was demo trading with: if the Binary Option was supposed to expire at, say, 10h15, ‘on the dot’, for SOME reason or the other the Binary Option was kept open until, say, 10h16, and, OF COURSE, that last minute was JUST enough for your Binary Option to expire ‘out of the money’ ALMOST ALWAYS and THAT was on DEMO accounts so I can only imagine that the live accounts would be even worse!!! In other words: had the Binary Option closed at EXACTLY 10h15 (in the above example and as it should) it would have expired ‘in the money’ but by the broker ‘delaying’ the expiry time of the Binary Option the Binary Option would inevitably expire ‘out of the money’. This is our equivalent of ‘bucket shop brokers’ holding profitable positions open until they’ve turned to losing positions and only THEN closing them out. In each and every case I sent emails asking WHY at the time that the Binary Option was SUPPOSED to expire it would have expired ‘in the money’ (profitable) but it only expired 45 minutes later ‘out of the money’. To this day: I’ve never received ONE single reply from any of these brokers as to ‘why’. What’s more: in my ‘investigations’ at the time I found that there really are only one or two Binary Option Brokers (let’s call them ‘Retail Binary Options Brokers’) (well other than the ‘real’ Binary Options Brokers like those that are recommended by the CBOE). All of the others are merely our equivalent of Introducing Brokers or White Label Brokers (the software is re-branded) for these one or two ‘Retail Binary Options Brokers’. What concerns me even more is that of late: the ‘pop-up’ ads for Binary Options are ‘popping-up’ more and more.
So there’s my ‘take’ and my warning about these things. I’d be keen to know if anybody here trades Binary Options and if so how they’re doing. (And that’s not an invitation for the Binary Options Brokers to ‘create’ ‘members’ here and have these ‘members’ tell everyone how well they’re doing)!!!