The main directions of development of the global financial market (primarily its segment – online trading), which have been observed over the past 5-10 years, raise many questions and disputes not only among beginners, but also among experienced traders. If before the exchange trading entities understood that their income is formed due to the difference in the prices of financial assets, as well as sources of profit were affiliate programs and the provision of advice or hedging of risks (participants in export-import operations), today their opportunities have expanded significantly. But this does not mean that everyone can safely abandon their main work and “immerse themselves” in studying the activities of successful traders.
The process of development of this industry is accompanied by the emergence of categories that cannot always be “tied” to specific economic indicators. And the most controversial financial instrument in this case is binary options. Today, many participants in online trading associate binary options with fraud, fraud and other negative phenomena. Moreover, if you conduct a survey among traders to find out how binary options trading is carried out, the majority of respondents will not be able to give the correct answer to this question.
How it all started
It is hard to believe, but the first options appeared in the 17th century, when enterprising Dutchmen began to conclude agreements on the purchase / sale of tulip bulbs at fixed prices, long before this product grows. The main features of such transactions were:
1. They practically did not differ from modern operations with binary options.
2. But the basis of these transactions was real liquid goods.
And how is binary options trading carried out today? Its basis is some abstract securities, currency or raw materials. Of course, they “exist somewhere”, but why are financial market participants concluding deals in binary options sure that at the last stage, someone will exercise their right to buy a certain amount of dollars at the established rate? This factor should be considered by every trader who wants to understand the essence of binary options. Bulbs really existed, they were really bought, paying with real money. In the case of operations on brokers’ trading floors, the full scenario of transactions with binary options does not imply that someone will exercise your right to buy / sell something at set prices. And this is one of the main reasons that binary options in our time are associated with fraud and fraud. We will definitely return to this issue, and now we will continue a short excursion into the history of options.
The next stage in the development of binary options can be considered their application for operations with stocks and other securities. Many financiers are interested in options during this period, but it cannot be said that they have become popular. Binary options exchange trading is closely related to the US financial markets. It is there that the formation of real binary options (stock exchange) takes place, which in our time is engaged in no more than 5 brokerage companies. The bidding algorithm itself involves the search for sellers / buyers who are interested in the trader and the conclusion of a transaction with him, the result of which will be the fulfillment of all obligations by the participants in this operation. One of the main features of exchange options is the inability to find out the amount of potential profit. It is not difficult to guess that such financial instruments do not attract either traders or investors.
Betting Binary Options
In parallel with the above trading instruments, in 2007 the Option Clearing Corporation is developing a binary options circulation mechanism, which is called betting binary options. Legalization of these financial instruments and simple rules for trading with them contributed to the growth of their popularity. Already in 2009, binary options trading is carried out in almost all countries of the world where such activities were not prohibited by local legislation.
Between 2009 and 2015, there were 800 to 1,500 companies on the network that specialized solely in binary options! To work with the binary options, no special knowledge is needed (advertising companies involved in attracting new clients for binary options brokers focused on this). The task of the trader is to choose the direction of change in the value of the asset, the amount and time of completion of the transaction. A similar algorithm attracted the attention of network users, many of whom did not even understand what the financial market is and how a trader differs from a broker.
The main problems of the binary options industry
Any activity related to financial markets always attracts scammers. This axiom is one of the main for everyone who plans to invest their money somewhere. In the situation with binary options, many forgot about this rule, which led to the quite expected problems. Swindlers quickly realized that trading binary options would help them “earn” huge fortunes without much effort.
Together with semi-legal companies, which nevertheless fulfilled their obligations, deceiving their customers only in the fact that their money is withdrawn to the mythical “American exchanges”, where scam operations are carried out, scam sites appear. Losses of traders are growing rapidly (transactions with binary options are already classified as very risky, and here also scammers). As a result, in many countries of the world, binary options lose their legal status or fall into the category of gambling, and newly made traders forever refuse such “financial transactions”.
Is it really impossible to make money on binary options trading?
Experts do not recommend contacting the binary options, arguing that the chances of traders to earn with the binary options are slightly higher than the probability of making a profit at the rates of the bookmakers. Still, technical analysis, news and other signals can improve the accuracy of financial forecasts. But for this it is necessary:
• Understand economic issues and be able to use analytical information.
• Very carefully choose a brokerage company (you need to take into account its age, reputation, availability of a regulator, methods for depositing / withdrawing money, etc.).
• Make deals only if you know this direction well.
• Never turn a trading platform into a casino.
• Use only proven strategies.
But of course, you should always start with small amounts. And the last interesting moment, despite the terrible reputation of binary options, some brokerage companies invite their clients to take part in options transactions, which received a new name – fixed and digital contracts.