A part of what makes binary options trading so appealing is that there are only to possible outcomes to speculate about. Certainly, the promise of high profits also draws a lot of people into it. However, because binary options as a financial instrument is so simple to use, some people have said that it is based only on luck. Therefore, is trading binary options more like gambling? Absolutely not. Because trading includes financial risks, it’s not possible to base results only on chance and this is the line that clearly delineates binary options from gambling.
Although determining if binary options trading is gambling is a very difficult question to address, answers come easily after examining various factors relating to how a trader trades and that is a far cry from what gamblers are used to. Here you will find some practices that a trader should never use when dealing with binary options:
Trying To Take the Easy Way
It’s normal that people would like to go for the easy route. They think that investing a high amount means they can receive the highest payout possible. That is called High Yield Options. But this is where things tend to go wrong though. The highest returns come only as a result of a perfect trade. Your goal is to earn profits and not lose your entire investment. The first mistake new traders make is expecting to get high returns straight away. People should trade in small amounts and work their way from there. Once you understand this, it will be a lot easier to enter the trade and rewards will follow. Just keep in mind that binary brokers are running a business and just like you, they too want to make a profit. They know that not all conditions are on the traders side and because there are always risks, they may try to use the High Yield Options to tempt new traders.
Trading Without Analyzing Platforms First
One of the worst things a trader could do is trade without analyzing the available platforms first. Most of the them have signals and charts on their websites that supply the information that traders need to make decisions. Technical indicators like candlestick analysis of data or bar charts are necessary for deciding which way the prices are moving. You should never just trust your gut when making financial decisions, because that is just a guess without any basis. It’s possible to download charts from trading websites and although most of the platforms offer free subscription to their clients, some may ask a small fee. If it’s only a guess, it’s gambling.
Trading on Run Bets
There are different contracts on various platforms. One of them is called ‘Run Bets’. Its 4 variations hold promises of a substantial profit and because most of the traders are hoping for an advantageous financial exchange, they would love to try it out. One of the run bets promises a double investment amount if there is a correct prediction after five ticks. The second options allows a 90% failure where one correct prediction out of 10 deserves a payout of ten times the initial investment. The third one says that after five ticks the price of an asset is going to end on a chosen digit ranging from zero to nine. The fourth one says that the price will not expire on that certain number. In both cases, the payout will 10% of the investment. It’s best to reconsider the odds that are against you as all of the options in Run Bets point to gambling.
The above mentioned scenarios are just some that represent or resemble gambling and have not that much to do with financial trading. If you see yourself leaning towards these scenarios, check your actions, because these types of ‘too good to be true’ payouts are very tempting. Don’t go for very short expiry periods and very large payouts and always use available tools when trying to predict movements of prices.