If you’ve been anywhere near the internet in the last few years, you’ve likely seen ads for binary options trading and forex trading. These are invariably scams, and you should stay away.
As the word ‘binary’ implies, a binary option is an option in which two outcomes are possible: based on a given outcome, either you get a designated amount back or you receive nothing.
If that sounds more like a round of roulette than a sound investment strategy, well there’s a reason binary options have become such a common way to con investors.
Of course, that could simply make binary options a high risk, high reward method of investing. Sure, you risk everything you place on the ‘investment’, but you stand to make serious cash in return.
In reality, the odds are deliberately stacked against investors, who are manipulated in very sophisticated ways by binary options providers. A detailed investigation revealed that these companies manipulate pricing data, and even refuse to pay investors who try to withdraw their money.
Binary options providers are especially dangerous because they understand how information spreads on the internet. For example, Googling phrases such as “are binary options a scam?” frequently directs users to websites operated by binary options companies.
For that reason, it is important to state categorically that binary options are not a legitimate investment products and binary options providers are not reliable financial service providers.
The Forex Connection
Binary options companies also employ a sly trick: the sometimes label their products “forex trading”.
Foreign exchange trading is a legitimate investment practice, but that is not what these companies are offering. (Besides, real forex trades should only be made by experienced investors as part of a broader investment strategy.)
Instead, these companies offer the same binary model on currency bets. If you bet that a given currency will go up at a certain point and it does, you ‘win’ the bet, if it goes down you lose everything you’ve placed on that bet.
This is not how real trading on foreign exchange markets works. And anyway, the bets are rigged to ensure the house always wins. At least casinos are subject to regulation and oversight.
The Appeal of Technology
Once you take a closer look at binary options platforms, it seems obvious that these are terrible places to invest your money.
That doesn’t mean that people who invest in binary options are naive suckers. On the contrary, the design and user layout of binary options and forex sites are often extremely sophisticated, promising cutting-edge technology that provides simple and efficient access to global markets. That is appealing to any investor.
Then when a potential investor tries to do basic due diligence by searching for background information about the product and companies involved, the resulting information is often written by the companies themselves.
The last thing we need is to become more paranoid about online finance. Internet banking and trading isn’t totally free of risks, but carrying cash or writing a cheque also has risks. Instead, we should remember to always practice reasonable caution and to only invest with registered companies whose track records we can verify.