In binary options trading, traders are allowed only two types of pay-off, either some fixed amount of money or nothing at all. This type of trading has become a very popular way of making money by investing in different commodities, shares and even foreign exchange.
One of the reasons of its popularity is the ease of decision taking. While trading on a binary option, you just need to anticipate whether the price of the underlying asset is going to rise or fall. Every successful anticipation receives a pre-decided amount and each wrong decision results in losing the money invested. Fortunately, there are limits on gains or losses that can occur from a binary options trade.
Why this type of trading seems to be scam?
There are some aspects of binary options trade that make it look like a scam.
- Those who trade sometimes lack enough knowledge on the trading system and strategy. That’s why they make mistakes and consequently forego the money invested to buy options.
- On the other hand, there are definitely numerous scam sites providing binary options trading platform. Lack of information leads some traders to do business with these scam sites which eventually results in loss of money invested.
- Even if it is due to their own misjudgment of market conditions, traders call a binary options trading company scam just because they didn’t receive any profit from the trade.
In short, no doubt, there are scam companies who have taken advantage of blind gambling natures of some traders to make money. But most of the companies are not scam. You need to understand that if you wish for huge gain, you have to take higher risks and vice-versa.
How to know which binary options trading company is actually scam?
Scams are a regular phenomenon in financial industry. A large section of investors lack the required investment related knowledge yet wish to earn some easy money by trading financial instruments. And most scam companies look forward to these types of traders.
But all these do not mean that people should not try their luck in binary options market. There are some easy ways to identify a legitimate broker or a binary options trading platform.
Understanding the system
It is very important that before entering into trading actively, you educate yourself, at least, on the basics of binary options trading. If you are not familiar with the whole system, you are not in a position to judge the promises made by a broker and consequently cannot make difference between a scammer and a legitimate broker.
Research on the company
Use all types of online and offline sources to get information on the company or the broker. Independent reviews, press reports etc. can be great ways to know about the reputation of the company. Besides, make sure that the company comes under regulation irrespective of the country.
Take cautious steps
While investing your hard earned money, it is always advisable to be slow and steady. Try out the system by making small investments. Diversify in different options, trade with brain not with heart. If something is unclear or fishy, the best way is to avoid that.
How the scam companies make money?
A scam broker manipulates the price of the underlying asset at the time of expiry of the trade such a way that the trader’s gain is zero and all the money goes to the scam broker. Even if officially expired, the scam brokers hold the clock for couple of seconds so that a price is achieved when a trader loses his entire money. The trading platform is so designed that a trader can no way know the actual price of the asset at the expiry of the contract. In addition, some of the trading sites are also designed to get slow or hanged towards the end of the trading making the trader unable to see the trade performance.
Another major risk from scammed trading companies is the possibility of identity theft. Some online trading platforms gather customer’s data to misuse them.Several nations are now engaged to develop regulations for binary options trading. In countries like United States, it is highly regulated to protect traders’ interest. If not so in your country, it is your responsibility to protect your money