I am going to talk about one of the craziest things we can find nowadays in the world financial markets: investing in binary options.
This is something I have already talked about but I need to emphasize the fact that it is very common to see phrases with this.
Basically we have to understand that investing and binary options are two opposite poles. In other words, binary options are not meant for investing in reality.
I find many webs recommending investing in binary options and sometimes “free advice” on how to do it. I guess they are very interested in the novice traders.
Novice binary options
The best advice is that with binary options we avoid the leverage.
The basic reasoning is that with leverage we can get into debt and owe money to the broker. Since binary options have no possibility of this we should assume that they have no leverage.
Well, it is truth that we cannot lose more money that we deposited with binary options, but it does not mean that they do not provide leverage.
It would be too good to be truth otherwise.
Besides you only risk a small capital every trade. As an example, you can see how an asset plummets 50% but you only lose 25 USD that you had bet.
This must be the definitive trading asset.
The future of trading is here, although I do not rule out that such a system could be ruling the future of trading once the corrupt systems goes belly up.
In other words, I see one day a government banning most financial transactions or making them very difficult. That day, casually, it is likely that binary options remain untouched, since they could be considered as more betting than trading.
Binary options advices
Another good advice to invest in binary options, supposedly, is having a trading plan or strategy.
Therefore we look for a strategy with some technical and fundamental analysis and we should be ready to join the successful club of famous binary options trading for a living traders.
Actually I do not know any guy who makes a living out of trading binary options.
Binary options demo
Another advice we find often in the binary options markets is that of trying with demo accounts before going real.
The problem is that the majority of binary options brokers do not offer demo accounts.
I suppose that they do not do it too much since they would lose some customers who would notice that even doing demo they did not have any chance.
Some binary brokers, however, provide these demo accounts. After all, that is not reason for the customers not to open an account. Many of them even do it after losing in the demo account. They think luck will be in their side.
Anyway, the binary brokers know that some guys will be in profit after a few days, so they have happy that many of them will open real accounts later since they trust their systems.
Anyhow, despite whatever you can see online, binary options are not an asset for investing but for betting or trading. Actually they do not differ too much from a football game.
What happens today is that the word “investing” sounds better than “betting”.
In fact, invest as a word can only be applied to a few markets, like stocks, funds, ETFs or bonds.
These are the most efficient markets to trade.
Although in certain instances and for someone very capitalized, perhaps we can have some long term investing using futures. However, for that we have ETFs nowadays.
The only advantage of the future is that it would give us leverage, but it would not be investing but trading.
The problem with binary options is that they do not even work for short term trading. They are just for: betting short.
Whoever who spends thousands of hours and years trying day trading eventually comprehends that it is an impossibility.
If you find a pattern try to take advantage of it as soon as possible because there will be a day there will not be plausible to use it or trade.
No matter if you pattern gave you a 400% because eventually that pattern will make you lose an 80%.
Therefore if you are thinking in investing in binaries know that they are not for investing, but for trading or speculating.