Traders used to go to the stock exchange to trade currencies or stocks. Now trades in all types of assets at different exchanges are made over the Internet. Because the quotes are displayed in real time and the transactions are made in one click, there are many simple but questionable ways to increase your income through asset price fluctuations. For example, binary options.
What are binary options
Classic, non-binary options are traded on the market just like other exchange-traded instruments. These are contracts that allow the holder to buy or sell certain assets at a fixed price. The trader buys an opportunity to make a transaction later at the prices set in advance. The trader's profit is the difference between the agreed price and the real price of the asset at the time of the transaction. It has little to do with a binary option.
Binary option allows you to make money on the correct prediction of which way the price of the asset will move in the set period of time. Essentially, it is a betting transaction. There are only two options for such transaction: either the forecast will be justified and the trader will make profit, or it will not be justified and the trader will lose the investments. That is why this tool is called so.
In contrast to classical options the profitability and the amount of loss on binary options are known in advance. In binary ones it is the direction of price change that is predicted and not the difference by which the price will change. The execution period of such trades is from one minute to several months, the profit or loss is fixed.
Trading assets for a binary option are currency pairs, stocks, trading commodities and indices - sets of assets such as stocks.
This way of earning appeared in 2008, when the Chicago and American stock exchanges provided their platforms for transactions. Russian traders gained access to the tool a few years later. In many countries binary options are treated as gambling and not taxed.
To trade in binary options, you need to choose a broker, open an account with him and download the terminal, or trade in the browser. The essence of trading is the trader's guess as to whether the price of the chosen asset will rise or fall. The direction is chosen by two buttons: "Above" or "Below" (Call and Put). If the prediction comes true after a set period of time, the trader will receive the invested money and profit. The assets themselves are not purchased.
If the trader does not guess, he loses the money he spent on buying the contract. If the price does not change, the trader does not lose or get anything.
Some brokers compensate to the trader a few percent of the investment if the trader loses, and this is what attracts clients.
Since binary options allow gaining a large profit in a short period of time, they are mainly used for speculative purposes.
How do they cheat on binary options?
As the Russian legislation does not regulate binary options and their popularity grows every year, the number of swindlers who make money on traders' losses increases as well.
It is not easy to get back the money appropriated by the scammers because the company may turn out to be a fly-by-night company, may be registered in another country, or the contract signed by the client may state that it is not responsible for the client's losses.
Scammers block the withdrawal of funds and refuse to return the deposit and the client's profit or simply steal money from traders' accounts under the guise of commissions.
Manipulation of the platform
Brokers manipulate the trading platform. They change the payout amounts and prices, and do not respect the time intervals so that the trade turns out to be unprofitable. These methods are used in case of short-term options, so that the trader could not prove anything or did not notice the deception at all. It happens that the platform hangs up when the client is trying to make a successful trade, and activates when the trade becomes unprofitable.
Promising bonuses and ban on withdrawals
It happens that scammers credit bonus funds to a new client. However, they can only be withdrawn after making a turnover that is many times the amount of the bonus. As long as the trader does not make a turnover of the required amount, he cannot withdraw any money from his account.
Using personal information of clients
The brokers request photos of credit cards, documents and personal data of a client in order to withdraw money from his card, open accounts in the trader's name at other companies or sell these data to other fraudulent organizations. Sometimes scammers send a trader an e-mail with links to steal passwords.
Is it worth trading binary options?
Trading binary options is not safe. Even if a trustworthy broker is found, the chance to lose money is greater than the chance to make profit as the potential loss on each trade is greater than the potential profit.
To protect yourself from fraud and serious losses, it is better not to use questionable instruments, especially when there are alternative, more reliable options to earn money.