Internet marketing is full of scams, but one that has been growing dramatically is products that promote binary options trading.
Not only is this an extremely risky way of making money, but the product marketing tends to be highly misleading.
In fact, many of these products are so convincing that no one even stops to ask themselves, does binary options trading work?
In this post, I really want to break down the nature of these types of products and just how binary options trading is supposed to work.
Binary Options Scams
Sites promoting binary options are very common and this is partly because many of them don’t last long. For the most part, they are incredibly misleading and very manipulative. To look at how they do this, I’m going to go through the key aspects of one particular product, called Profit Monopoly.
There is a good chance that this product won’t still be online by the time you read it, but the site is a pretty typical example of how these sites promote themselves. So, this is the landing page of the website:
Do you see the line at the top saying how many people are watching the video from Virginia, United States?
This approach is very common, and it’s taking advantage of a psychological effect called social proof. Basically, an audience will trust the marketer more if they feel like other people trust them too.
Almost every time, the numbers are made up and generated using a back-end algorithm. An easy way to tell? Refresh the page and see if the number changes. Often these types of algorithms will start from the same number each time.
In this case, refreshing the page will consistently tell me that 5 people are watching the presentation. Despite the fact that 11 were apparently watching seconds before I hit refresh.
All of the sales pitch for the product is in the video and for the most part, the video is a rags-to-riches story.
For most products of this type, the sales pitch will emphasize how you don’t have to pay anything and how you too can make money using this ‘fantastic’ and ‘revolutionary’ new product. Very rarely will they tell you anything about the product or exactly how you are supposed to be making money.
Most of the videos I’ve seen don’t mention binary options trading at all, and they certainly don’t ask does binary options trading work?
So, people go into this system thinking without really knowing what they are getting into.
Most people aren’t too concerned because the product is free – right?
Kind of, but not really.
Products like this are basically doing a bait and switch routine. They tell you about this wonderful free opportunity, then turn around and try to sell you something.
Let me make something clear. It is literally impossible to make money in binary options trading without spending money.
The reason for this is that binary options trading works like a combination of stock trading and gambling. You are essentially making money from the money that you ‘invest’. Now, if the probability of return was decent, this might be worth it, but it really isn’t that good.
More importantly, the people who get into this system do so thinking it is a free product with no risk.
To show you what happens next, I’m going to have to show you using a different product, because the one I was originally talking about actually stopped being available and linked straight through to a very similar product called Binary Pilot.
So, you sign up for this free product that can make you money.
With any site that is promoting binary options trading, you then end up with a set of steps like this:
So, making money with this product means that you have to deposit into the broker’s account and then start trading with that money.
Yet, most companies promoting this approach continue to advertise it as free.
One thing I absolutely hate about this type of product is that you can’t just deposit $5 or $10 and see whether you like the process. You have to deposit the minimum amount. For most vendors out there, this is either $200 or $250.
From reading comments, complaints and discussions I know that there are a lot of people out there that do fall for this rhetoric and end up making that minimum deposit. Some of them believe the hype while others think that they will be able to simply withdraw their deposit if they don’t like the system.
But it’s not that simple.
Brokers and Refunds
There are a lot of different brokers out there and just like any company, there are some good ones and some bad ones.
With a bad broker, there is a very real risk that you will lose any money that you put into it. In fact, many companies have a reputation for not paying out their customers even when the user does make money through trading.
Others have really complicated conditions before you can withdraw any money.
For example, I saw one company that made users trade a certain number of times before they were able to withdraw any money. If that person was losing on the majority of their trades, then they probably wouldn’t have that much money left to withdraw.
Any site that is promoting binary options trading by offering ‘free’ software will be forcing users to go through a specific binary options trading site.
In theory, this is because the product owner needs a way to track signups.
In practice, this is because the product owner makes money from what people spend on the site.
In many product videos, the narrator will claim that he only makes profits if the user does. This might be true, but I doubt that. It’s much more likely that the product owner is making money for referrals.
If he wasn’t, he would probably put more effort into making sure people actually make money.
All of this means that when you use a binary options broker recommended by a site providing ‘free’ software, you are probably getting a bad quality trader and you do risk losing the money you invest.
In reality, you may even find sites promoting binary options trading in this way who guarantee that the broker they are promoting will give immediate refunds. I’ve actually seen this before.
This guarantee doesn’t actually mean anything.
The broker in question doesn’t have to do anything the person promoting the broker says and they probably won’t.
Binary Options Trading Itself
Despite the controversy surrounding it, binary options trading is considered a legitimate form of trading by many people.
Trading in binary options is legal in the United States, but this is dependent on the broker you are trading with. Offshore companies that offer trading to citizens in the United States are actually illegal to use. Instead, you have to look for companies that are registered correctly and are listed on the United States stock exchange.
The exact wording of this rule is as follows:
This means that it is a good idea to avoid any offshore companies for binary options trading entirely, particularly as you will get little support if something goes wrong with these companies.
So, how does it work?
With binary options, you are considering specific assets and trying to guess what direction the market is going to move in. This basically means you make a bet whether the number is going to increase or decrease, and if you are right, you win that trade.
This is an example from one specific binary options trading company called Boss Capital:
In theory, if you know the markets very well, then you have a chance of practicing the change accurately, but in reality, there are so many little shifts in asset numbers that predicting is almost impossible.
Another example of the trading can be seen here, at Redwood Options:
As you can see, there is so much variation in the commodity, making it difficult to predict anything.
So, regardless of how well you know the market, you are bidding in, there is a good chance you will get it wrong at least some of the time.
In essence, binary options trading is little more than gambling. For the most part, you have a 50/50 chance of making the right decision and that’s pretty bad odds.
The thing is, to just break even, you have to have a win ratio of above 50%. So, even if you do manage to win a few trades, the likelihood of you actually making an overall profit is still pretty low.
Like gambling, binary options trading can be addictive, particularly if you win a few trades. While it might seem like a form of investment, it’s very easy to get carried away in binary options trading and lose a lot of money.
Finally, these sites are legal, but there is no guarantee that it will stay that way. Right now there is very little regulation covering these sites and there is also very little protection for consumers.
All-in-all, binary options trading is a very risky venture.
The Software Part of the Scams
All of the different sites that promote binary options trading have one thing in common: they are offering a piece of software that is supposed to help with trades.
Most of the time the software is free, but sometimes you actually have to pay for it on top of everything else.
To be honest, I wonder whether this software comes from and my instinct tells me that it is probably something the binary options trading companies provide themselves.
The thing is, there are so many different scam sites out there that promote binary options and they all use roughly the same tactics, including the same type of software. Overall, the concept is that this piece of software changes the balance in trades, making it much easier for you to win trades.
That’s the concept anyway.
Thing is, 95% of the time, you don’t even get to see that software until after you have made your $200 deposit to the broker.
I have looked at the software before because there are one or two products that actually let you see it first. Honestly though, I wasn’t impressed. Using software to predict changes in an unpredictable market is a long shot at best and it simply doesn’t make a difference.
Even with this software, most people making trades lose rather than win.
Honestly, I think the software is a handicap.
These sites tell you that making money is fast and easy, and then give you a tool to do so. People then take that tool and use it on the trading sites. By doing this, they skip over learning about binary options trading, how it works and what the odds are.
More importantly, they don’t have the skills or information to approach the trading with the best chance of winning.
If binary options trading is really something you want to do, then don’t use software and don’t use the trader that some random site recommends to you.
Do your homework, understand the brokers out there, the laws and the markets that you are going to be trading in.
One approach is to take time and study things that move the instrument that you are interested in trading. For example, the dollar tends to move when the monthly unemployment benefit is released and precious metals move with the release of bullion reports.
Understanding these movements can help people to better predict overall outcomes and can help to improve success odds.
Nevertheless, binary options trading is still an approach that is largely based on chance and can end up being quite expensive.
A final piece of advice when it comes to using binary options trading, if you plan to, is to be very careful of matching deposit bonuses. These bonuses are designed to look enticing and give you more money than what you paid, but there is a major downside.
If you agree to a matching deposit bonus then it will be very difficult to withdraw your money particularly if you find out that you don’t really like binary options trading after all.
If you were to ask me, does binary options trading work for making money, I would have to say no.
Like gambling, there are some people out there who have hit it big, and there are many more people who have lost a lot of money. If you are going to go gamble fine, that’s your decision. However, don’t go fooling yourself that binary options trading is a form of investment. It’s simply not.
If you want to make money online, a much more effective and long-term approach is to start your own business. This is something you can develop and grow, rather than taking chances on random changes.
Realistically, developing your own business is nowhere near as complicated as it sounds and a good place to turn to for advice and support is an online business community, like Wealthy Affiliate. In fact, this is actually where I learned how to make money online and I continue to go back for training and support.