Why binary options don't work
by Christopher Butcher, 10/10/2016
So this is a subject that genuinely upsets me – innocent people are being sold hopes and dreams by salesmen, not traders. Their techniques are unparalleled – screenshots of conversations with ecstatic customers, pictures of flash cars and watches and not to mention constantly rubbing their recent profitable trades in your face. Let’s get this abundantly clear now – these are classic sales techniques.
Firstly, I want to emphasise I am not out with an incentive to knock a particular market or method – I just speak the truth. And just like anyone else, if there is a genuine shortcut to making fortunes, then I’d be in the queue too. My motivation for writing such an article is having heard so many unfortunate stories of decent people losing money to binary options, and yet my social media is flooded with people still trying to sell the idea.
Let’s start with some numbers. Binary options are tools used to determine if a price is going to end up higher or lower than the current price in a set period of time – usually very short term. In trading, the shorter the time period you trade, the more random the price moves. Let’s make the most realistic assumption here – we have a 50% chance of the price going up, and 50% chance of the price going down.
Let’s say you bet £1000 on the price going up. If you are wrong you lose your stake. However, if you are right the payout is only 70-80% of your stake. So you are risking £1000 to make £700-800 on an event that has a 50:50 outcome.
Where is the longevity in such odds?
This means that your chances of profitability in trading binary options sits at only 35-40% - i.e. you are more than likely going to LOSE money.
As a side note, and not that I approve big gambling, but your chances of profitability on betting red or black on a roulette wheel is over 48%. So you may aswell hit the casino, you get a good night out, and our chances of winning are better!
So why are binary options all we hear about?
They are the most simple and easy-to-understand concept. In other words, companies and “signal providers” love them because they are the quickest way to get people up and running to part them from their cash.
Life in the modern era is tough – we are taught to work long hours to protect our family – and in sacrificing that time, we step further away from financial freedom.
Binary options SOUND popular because people stuck in the grind
still want to believe there is a way to their riches with minimal work
whilst they can still do their normal 9-5. They love the idea they
can still make it, and the images of flash watches and cars makes
them feel evermore closer. These people want to believe it’s as
easy as receiving a text telling you what to do, or even better just
giving your money to someone else to do it for you.
The underlying reality is, when you pay someone for their “signals”
or trading “service” you are actually funding their next watch or car
for them to show off to the next unsuspecting person that comes
I’ve tried to have several conversations with some of these
apparent trading experts – and every time I’ve not known whether
to laugh or cry. 1) Every single one of them did not have a clue
about actual trading and 2) even when that was apparent, and
despite them knowing my background, they still had the cheek to
try and sell something to me.
It’s completely clear to me that there is no long-term profitability associated with binary options unless you are the one scamming others, and there is a reason that established Investment Banks and Hedge Funds do not trade them.
The age-old saying of there are no shortcuts to anywhere worth going holds strong in this case.
I guess in conclusion, all I’m trying to say is be extremely careful. There is no statistical longevity in trading these over-hyped products, and from what I can see, salesmen are willing to go to the utmost extremist lengths to get your money – and unfortunately you are more than likely never going to see it again.