Are Binary Options Applicable To Both Trading Or Gambling
Binary options are a hot discussion topic anywhere in the world. There is a lot of information out there and it is difficult to make sense of it all. And the truth is that there is false information out there and, as a result, a lot of false conclusions are drawn from it.
A lot of people like to think that Binary options are like online gambling because you are investing your money on something that you simply cannot tell with a respectable degree of confidence. Since you are trying to predict whether the cost of an asset will appreciate or depreciate within a specific period, you can either be right or wrong, regardless of what you may have learned. Let’s take a look at whether this assumption is true or not.
Gambling or trading instrument
There are questions around whether or not binary options trading should be classified as internet gambling or trading and whether it is a legitimate financial instrument.
There is no way you can state with a hundred per cent confidence that the outcome of the trade will go as you saw it, but the same could be said about anything else in life, all activities have some degree of risk attached with them and there is no way you can ever predict with total certainty that your plans will work out your way.
So there is no doubt an element risk that you might lose the amount you invested to purchase the trade. However, most people do not realise that part of binary options trading involves the rigorous study of market trends, chart analysis and how assets tend to move from time to time. It also requires an understanding of binary options pricing. This is why those who bother to understand the market, in general, are the most successful at it.
If you have read our recent update on binary options regulations around the world, you have probably noticed that many countries are not sure how to classify binary options. Some choose to consider it a financial instrument while others still treat it as gambling. This shows a very weak understanding of the industry by even most qualified institutions.
Therein lies the difference between gambling and investing, while gamblers are emotional people, willing to lose money against a hopeful outcome, traders are intelligent analytical people who have rigid money management strategies and place trades in carefully selected scenarios that offer the highest chance of a positive return. If binary options could indeed be classed as gambling then all traders in stock markets are gamblers and surprisingly, many of them are some of the richest people on the planet.
Differentiating binary options in gambling and trading
Coming back to the question of whether or not binary options should be considered as gambling, we have to carefully look at each category of binary options and decide whether it is possible to develop a system with an overall positive expectancy.
Money is wagered emotionally.
Gamblers like to rely on luck.
Risk is maxed out.
Predicting the outcome is often impossible.
Gamblers are easily tempted by casino bonuses.
Money is invested in intelligently.
Risk is understood and accounted for.
Traders like to rely on careful analysis and planning.
The outcome is treated as a statistical probability.
Traders are inherently suspicious of too good to be true scenarios.
Risk in binary options can be brought down systematically by careful use of charts, market analysis, and strategies. With the aid of charts, you can understand how the price of an underlying asset is moving so that you can make an informed decision. When you have the history of how the asset has been behaving through a set period, you can at least gain an idea as to how it may behave in the next few minutes or hours.
Next, you can use strategies to reduce the risk as well. For instance, you could use a strategy called “Spreading” where you can duplicate a trade across several different binary options platforms. Since each of the five trades will be placed a few seconds to a few minutes apart from each other, it instantly increases your chances of scoring a winning trade on at least a couple of them.
All forms of trading are gambling if you view it as so. Because trading digital options have a fixed payout and loss people will assume such.
When people compare binary options to gambling, they are missing a major fundamental difference; casino games, Roulette, Blackjack and slot machines are games of chance and not skill. With binary options, there are outside forces, like market events, which cause price movements. A good trader can interpret market information to know when odds are in his or her favour.
Unlike gambling, in binary options, you can predict with a high degree of confidence how an asset will move! While this does not mean that all the trades you place will win, there are ways you can turn most of your investments into winning ones.
Author : Heather Heaton
Published Date : 23/09/2019
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