The Truth About Binary Options Brokers

Feb 24

The Truth About Binary Options Brokers

“The Truth About Binary Options Brokers”

 O  K – So you’ve started out with Binary Options and you’ve found a friend in the brokers. They want to “help” you with lessons and give you guidance; some of them even want to give you signals to help you win. For a sizable deposit of $5,000 or more, they will give you one of their best analysts (account managers) to feed you signals on a regular basis and help you to become a superb trader. But what exactly is the truth about binary options brokers?

One of the major nagging feelings inside your head is, “What’s in it for them?” – Or, “Do they profit from me winning or losing?” – And I know this is a nagging feeling inside your head, because it was in mine for several weeks.

Some of the binary options brokers will tell you they profit when you win, not when you lose. Others will say they profit from “volume” so it is in their interests to ensure you become a successful trader to the point where you’re placing fairly sizable trades and they are making bigger money. When you’re placing sizable trades, they’re making bigger profits.

You would be forgiven for remaining confused and bewildered. After all, it isn’t really a straight answer. It’s one of those answers that you expect from a politician more than you would from a binary options broker. So what exactly is the truth about the binary options brokers? Do they profit when you win? Do they (as some of them say) place spot option trades on the Forex markets when you place trades on their platform?  Well, let me help you with that.

FACT: The brokers profit from the losses incurred by the majority of traders on their platform.

In other words, they profit when you lose, not when you win. That is the case with ALL binary options brokers – No exceptions. That’s it – That’s the business of binary options – The bare bones of it laid bare for you – A fact all the broker platforms seem to have a problem revealing to you. Binary Options Brokers are nothing more than a casino shop. The binary options brokers are not your friends. They provide you with free lessons and free signals because they know, even with this help, you will still lose in the long run. They are the ‘house,’ and the odds are stacked in their favor  Overall, they will win because of those odds. So the question then becomes, what are these odds? Can you beat the house and can you profit from Binary Options?

 

The Odds in Binary Options

I won’t bore you with all the mathematics as it is outside the scope of this article, there are sites out there that have broken it all down to illustrate the deal, you could find them if you look. I’m happy to write a detailed post about it if you like, just ask in the comments. But to summarize how it works, when the trade you place on a binary options broker platform expires, you will gain a percentage of your stake back if you win. This is anywhere between 65% to 85% on average. If you lose, you get nothing back – There are exceptions to this and some platforms will offer a small return back on a losing trade, but their win payouts are generally less favorable.

On average, all the brokers are pretty much all the same and the odds work out similar. The key figure, or ‘break even’ winning percentage is around 58% – In other words, you have to win more than 58% of the time to profit in binary options.

There are other factors that come into play. Most people who come to binary options perform very poorly. They adopt poor money management skills, they trade with emotion (anger can be your worst enemy). This ‘volume’ that the brokers speak of when they talk in terms of making their own profits is true to an extent but it is misleading. The ‘volume’ is a huge number of people placing trades on the same options. In general, 50% of their clients will place a ‘put’ at the same time another 50% place a ‘call’ on the same option at the same time – But because the winning odds are over 58%, in theory they will gain 8% on average every time. Estimates say over 90% of traders fail and ultimately lose – I would hasten to wager that in reality, it’s more than that figure. I’m not trying to frighten you off, I’m just giving you the facts.

 

Can you win long-term in Binary Options?

That’s a very good question and I honestly can’t give you a proper answer yet. I haven’t found the holy grail myself, but I’m still trying. I would like to think so, but you can only do well by adopting a number of solid rules like good discipline, trading without emotion, adopting excellent money management skills, concentrating on strategies and not on the money – Practice good trading by adopting good fundamental and technical analysis. Stay out of the markets on choppy days (Mondays and Fridays can be tough times to trade, and the US market session is always tough even for professionals). Best times to trade binaries are during the Asian session and London before NY opens.

If I had my time all over again from day one on Binary Options – I would find a way to open a demo or practice account and keep at it until I was consistently winning. Play with Monopoly money until you have a solid strategy that works. That’s the best advice I could ever give a newbie to binary options.

 

If you would like to know more about this ‘volume’ that the brokers speak about, I would recommend watching the following video. However try not to be put off by the negativity, you can always play binary options safety using a demo account before you start trading with real money. Binary options isn’t for everyone and remember, there are far many more losers than winners – Otherwise, the brokers would be out of business. They don’t want you to know that they profit from your losses – This fact is an instant bitter pill to swallow. But I think you are better off knowing this from the start, because then at least you are aware that you have to be good – excellent in fact, to have a chance at beating the house. Good luck!

5 comments

  1. Edmund /

    I really appreciate your explanations on BO and the 15 RSI strategy as well as the other ones. Could please feed me back with the 10 best BO brokers among the lot. Also, how about binary.com, legitimate or scam?
    My style is 60 seconds BO trading. But, I can adapt to all other trading style. I would appreciate any comment or advice you may have for me. Hope to hear from you. Thanks.

    • admin /

      Hi Edmund,

      I trade 60-seconds myself now almost exclusively. I do quite well at it! I will write a post on strategy for it one day.

      With regards to recommended BO brokers, I have tried around a dozen or more over the last couple of years – I’ve been with all the major players, 24Option, TradeRush, Banc de Binary, etc… But save for the exception of 24Option, who are not too bad, I don’t rate them too highly.

      I quite liked 99binary.com for 60 second trading, at least when they used to give you the exact market price strike rate you clicked on to enter a trade… But then something happened with them and you never got the advertised market price anymore, you get a delayed 1, or even 2 seconds – So if the market jumped in that second, you’d get a different entry rate – So I left 99binary because of that.

      Now I trade exclusively on Stockpair. They are, in my opinion, the very best broker for BO out there. I wish they were paying me to say that too! LOL – But seriously, they are definitely worth a look. They are scrupulously fair on market price (ie. they don’t screw with the market rates like many other brokers do). But the best feature about them is that if you get on one of their programs, they offer a ‘cashback’ deal of up to 3% back on your volume each and every month. It may not seem like much, but it will surprise you how much can be made from that, especially if you trade a lot of volume to begin with.

      Also, their bonuses are much fairer than others. Instead of adding your bonus to the balance, then preventing you from making a withdrawal until you’ve worked off the 30x volume (like most BO brokers do), Stockpair don’t add it to your account balance right away. Instead, it’s put in a ‘pending’ state and you can see your volume eating away at the pending amount of volume left before the cash is released, restriction free, into your account. Meanwhile, you are free to withdraw whenever you like – A much more sensible, and fairer way to attribute bonuses.

      Last month I kind of broke even with my trading, but in actual fact, I profited quite a bit with all my awarded bonuses and cashback.

  2. Owen K. /

    Not sure I agree with your conclusions. Binary options are like any other type of trading. You need to know the markets and understand technical and fundamental analysis. You need to understand how to trade different timeframes and match those to market conditions. You need to study. Some brokers will say you don’t need to know the underlying markets. Not true. But, there are reputable brokers in the business. I will give you one. NADEX. Look them up. They are a binary options broker. Binary options are exotic options as opposed to vanilla options. Both are traded on an underlying asset. Know your markets and know what you are doing and you will be fine. Remember: nothing worth while is easy!

  3. Anonymous /

    Something that needs to be known about almost all the online Forex and Binary Options companies is that they profit from all situations. If you deposit, that money is in their account. A trader with an Online trading house will almost never be able to withdraw their funds.
    I have worked in numerous Forex and binary companies. they are NOT based where they tell you.
    This is a very, very dirty industry of liars and scammers. the only reason I am here is to learn as much as possible and take down whatever I can.
    Piece of advice: If someone calls you for Forex or binary, their name they say is not their real name. they are a false identity so you can’t track them and take out your rage at your stolen funds. When you get a call from them, be strong and say “don’t call me again, ever.” keep your money safe, Online Trading is Thievery.

  4. Jeff /

    I’m learning as much as I can about binary options. I have created my own Demo Platform using a Brokers platform linked through to mh Excel sheet, so half my screen is the brokers’ and the other half is my Excel page (so easy to see). I have inserted all the relevant formulas. I set my special stop watch for 60 seconds, record the entry prices and exit prices without cheating – and job done. You lose some you win more in my case. I’v traded this way just to practice and get to know the assets I trade. I started with an imaginary £10000.00 after just 3 weeks equating to just 23 hours trading that £10000 now stands at £19875.20. I’ll only start trading when I’m ready. Still need to learn the candlesticks yet so a few months work still to do. I’m glad thankful and appreciative for all the advice here, doesn’t it make you want to kick their arses’ even more. That’s how I feel anyway. They are not your friends, take no notice of all the sweet talk. I notice too you get a lot more calls when they want your money compared to once they have it. What does that tell you. Cheers guys and good luck

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