What is binary trading? Is it really profitable or just as risky as gambling?

For investors looking for additional ways to generate income, understanding new financial products is essential. Since a variety of investment tools can help you avoid pitfalls and increase your chances of profit, recently, Binary Options (Binary Option) has become a highly popular choice among investors.

What Exactly Is Binary Trading?

Binary trading is a financial product with unique characteristics. Investors must predict whether the price of the underlying asset (could be a currency pair, commodity, or account nationality) will rise or fall from the current level within a specified period.

When your prediction aligns with the actual price movement, the position is “In the Money,” meaning you will receive a return of approximately 70-85% of your invested amount. However, if your prediction is wrong, the position becomes “Out of the Money,” and you will lose your entire investment.

A key feature of binary trading is the very short expiration time, ranging from 1 minute to 15 minutes. The payout system is “All or Nothing” (All or Nothing), allowing investors to know the expected return and assess risk clearly from the start.

How Binary Trading Works

There are two main options in binary trading:

Call Option: When you expect the price to go up, this option will give you a payout if the price moves upward.

Put Option: When you expect the price to go down, this option will give you a payout if the price moves downward.

For example, to make it easier to understand: Suppose the GBPUSD pair is at 1.3902, and you believe the price will go up in 5 minutes, so you open a Call Option by investing $100 :

• If your prediction is correct: After 5 minutes, GBPUSD closes at 1.3950 (higher than 1.3902), and you will receive your initial investment plus $185 a return(.
• If your prediction is wrong: GBPUSD closes at 1.3850 $100 lower than 1.3902$85 , and you will lose )the entire amount(.

Is Binary Trading Gambling or a Real Investment?

A common question is whether binary trading, with its “all-in or nothing” betting style, is truly gambling or a genuine investment.

The answer depends on your approach:

• If you open positions by randomly guessing without a plan or money management, it can be considered gambling.
• If you have a clear plan, analyze the market, manage your funds wisely, and calculate risks/opportunities, it can be regarded as a calculated investment.

The Legal Status of Binary Trading Worldwide

Since binary options are high-risk financial products, many countries view this tool with suspicion.

Thailand: No laws currently support binary trading, meaning investors bear the risk themselves if issues arise with brokers.

Australia: The ASIC agency found that only 20% of retail investors can generate profits, leading to a ban on retail investor participation since May 2021.

European Union: ESMA issued regulations banning the marketing and sale of binary options to retail investors since March 2018.

United States: The FBI has identified most binary trading websites as fraudulent.

Canada: Online advertising and sales of products with less than 30 days of age are prohibited.

Israel: Declared binary trading as gambling, not an investment, and banned it.

Binary Trading vs. Forex: Similarities and Differences

) Similarities:

• Both are popular online investment tools.
• Allow starting with small capital.
• Can profit from both upward and downward price movements.
• Capable of generating high returns when predictions are correct.

$100 Key Differences:

Trading Hours:

• Forex: Opens 24 hours, 5 days a week.
• Binary: Depends on the trading hours of the underlying asset.

Instrument Duration:

• Forex: No expiration date; positions can be held as long as desired.
• Binary: Very short expiration ###1-15 minutes###, and cannot be extended.

Risk and Return:

• Forex: High risk, but leverage can be used; unlimited profit potential.
• Binary: Fixed returns (50-85%), with clearly defined risk.

Profit Potential:

• Forex: Returns can reach over 200%.
• Binary: Returns of 50-85% per trade.

Choosing Between Binary Trading and Forex

Choose binary trading if:

• You want to define risk clearly and stick to a plan.
• You can consistently win more than 80% of trades.
• You prefer short-term, quick trades.

Choose Forex if:

• You seek higher profit potential.
• You like flexibility in managing Take Profit and Stop Loss points.
• You are willing to accept higher risks.

Summary

Binary trading is a financial instrument with special features and limitations. Success depends largely on your knowledge, discipline, and understanding of risks. The most important thing is to distinguish between trading with a plan and gambling. Then, select the tool that best fits your investment approach and risk tolerance.

However, please understand that all derivatives are high-risk and may result in losing your entire investment. Trade only with money you are willing to lose.