Well for many people, they think it is some sort of scam, but seriously when you think it about, why would it be a scam when the house has such a huge edge built in?
Like the poster below refers to a 75% payout if you win your trade, but a 100% loss if you lose. That is pretty standard. Now just like when you are taking a trade that you think is going to go Up, there is somebody on the other side of that trade thinking it is going to go down. Your broker, puts you both together and takes a commission for his efforts, which is the spread.
Now with a Binary Broker, it is in his interest to have as many traders as he can, as there will always be traders thinking an asset is going to go up and those that think it will go down, all he has to do is accept the trades and he is in a perfect arbitrage situation, provided that he has the same amount of trades on either side. He is getting $100 from the losers and paying out $75 to the winners and pocketing $25. 25% that is the stuff dreams are made of and will make you RICH.
Of course if he has too many traders on one side of a trade, he is putting his own book at risk. You have to think of these brokers more like Bookmakers now. So they have to constantly keep balancing their books and if they get too much exposure on one side, then they will have to lay off some of that risk.
Now all the traditionalists will jump all over this and say “see it is just out and out gambling”
But honestly, when we don’t know what the outcome of something will be, but we think that we know the answer because of some analysis that we have made and then put money on what we think the outcome will be, hoping to increase that amount by being correct and losing it if we are wrong…
Well isn’t that the very definition of gambling?? And what every Trader is doing on every single trade, every minute of every day???
Don’t let anybody tell you different my friend, when you’re trying to predict the outcome of something for monetary gain’ and run the risk of losing that money if you are wrong, you are GAMBLING.
The only difference between those that show a profit and those that show a loss, is how good they are at predicting outcomes by their own analysis, some money management and a good old pinch of luck.
Now if you had a spare $100k laying around and were thinking of “trading” it, wouldn’t it make better sense to get yourself set up as a Binary Options Broker or a Normal Forex Broker and just cream off spread or arbitrage from degenerate gamblers.
After all, being a Broker is a Business, that has proven returns, limited downside and can be sold as a business when you are tired of it or have made your money and “trading” is gambling that will produce a few spectacular winners, a few just holding their own, but a majority of losers, just like we see it does. Pure and Simple.