If you are reading this, you clearly have some doubts about the purported monetary rewards of binary options trading, and rightly so. After hearing a typical binary options broker’s pitch, you might believe that binary options trading has to be the easiest and the most exciting ways to make a living. The truth happens to the complete reverse of this, unfortunately.
In fact, there is one in twenty chances that you will even manage to hold on to your investment capital, let alone make a large enough profit to consider binary options trading a means to earn a living. The reason is simple: there are very many pitfalls in binary options trading; so much so that you would be better off finding other ways to earn a living. Here are some of these pitfalls.
High Win Rates Required To Make A Return
To make any money from your binary options trading, you will need to win quite a large percentage of all the trades you make. Keep in mind that for every trade you make, you stand to lose a lot more than you can win, all because of the broker’s commission.
For instance, for an 80% option, you will only make $80 for a $100 dollar contract if it goes your way, but lose $100 if the trade does not go your way. Essentially, this means you have to win more than 50% of your trades just to break-even.
A Losing Streak Can Completely Wipe You Out
A bad day is all it takes for a binary options trader to completely blow their account. And trust me, these are quite common. For instance, if you are someone who likes to use the martingale strategy to place your trades, you will only have a handful of chances before your bankroll is completely wiped out by a series of bad trades, even if you have millions of money in your account.
Making Short-Term Price Predictions Puts You At A Disadvantage
Some traders are deluded into thinking themselves “lucky” at making predictions about how asset prices are going to change over the next minute or so. But with extremely fast computer algorithms doing most of the financial transactions in the world, no one can truly take advantage of market inefficiencies within such short time frames. So, trying to make money from short-term options is usually a sure path to failure. Ironically, this is the option most people choose.
Some binary brokers have however implemented long-term options, with expiration times of several days and even months. While these can indeed be predicted with high accuracy if you are knowledgeable, most common folk will still not be able to consistently win.
Trading can be mentally daunting, especially when bad unexpected things happen. People have been known to make terrible trading choices, even when they have enough trading experience to know better. But with binary options trading, after a frustrating trading session, all it takes is one wrong move for everything you might have earned through weeks or months of cautious trading to be wiped out.
Letting Your Account Manager Do The Trading For You
When opening an account with a binary options broker, some traders mistakenly think that the account managers are trading experts who can be trusted to profitably manage their money. Don’t believe this, even for a minute. Even if the account managers did have the skills to make you money, they have a greater incentive not to because they work for the broker and not you. Brokers profit from your losses, because this is the money they use to pay themselves.
Binary Options Trading Is Not There Yet
Despite all indications, binary options trading is yet to become a mature and dependable industry. At the moment, there are many scam brokers, unreliable signals, undefined regulatory frameworks, and so forth. To swat all these fastballs and settle down to monumental financial market challenges and eventually make money, you will need nothing short of a miracle.
If you are thinking of ways to make money, it would be best if you didn’t consider binary options trading one of them. The risks are just too many. The whole system is rigged against you from the way the broker commissions are charged to the way the odds of winning are designed.
Once you make a few mistakes, the chances of recovery are in most cases nonexistent. Add to that the fact that you have shady brokers and inadequate knowledge of the industry and you will realize that you are practically dooming your chances of making a living, or even a profit, by venturing into binary options trading.