Innovations in the binary options market

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Demo Account!
    Free Trading Education!
    Get Your Sign-Up Bonus Now!

  • Binomo
    Binomo

    Good Choice For Experienced Traders! 2nd place in the ranking!

News: Innovations in the binary options market

As you surely noticed trading markets have been tumultuous since early 2020. Some brokers are going (such binary brokers closing down their businesses), others are coming. On top of that, a lot of incomplete or twisted stories have spread over the internet such as about what happened in March. A lot of people are sending me e-mails asking about what may come next. I would love to answer your questions, unfortunately right now nothing is 100% sure.

In this text, I will do my best to explain to those who don’t understand the situation or want to know more about what’s happening in the markets. Please, read the article completely and attentively.

Intro: What’s happening?

This had been a hotly debated issue in the binary options trading community for long but nobody knew when it was going to come. It came not long ago. What I am talking about? I’m talking about tightening rules or setting restrictions for online trading.

To be more specific, binary options trading will be banned totally because some people suffer losses. Obviously not everybody is a loser but the majority of the traders is. As we described in our article Statistics of binary options earnings 75 % of all traders lose, which was admitted by ESMA.

Regulated vs. non-regulated brokers

The mentioned changes will only impact brokers regulated by the EU. It’s a pity, but there is no other way to tackle this issue. Brokers regulated outside the EU (such as HighLow in Australia) or non-regulated brokers will not be affected by this change. These brokers will be allowed to continue offering binary options trading as before. However, be careful.

MasterCard has recently announced its intention to ban all payment transactions on accounts operated by non-regulated brokers and scam brokers. VISA has not yet mentioned such plans in the public but it’s likely that it will follow the suit. This could be the end of scam brokers – eventually.

You may say that binary options as such (traditional options) will soon no longer be allowed for trading. Attention! Digital options, ladder options, and similar instruments will remain unaffected. These will be available in the future same as before. By the way, digital options are being offered by the best broker in the market, IQ Option, so don’t worry that nobody will be offering trading this instrument.

Along with binary options, the recent regulations are centered on other financial instruments such as CFD or cryptos – continue to read.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Demo Account!
    Free Trading Education!
    Get Your Sign-Up Bonus Now!

  • Binomo
    Binomo

    Good Choice For Experienced Traders! 2nd place in the ranking!

Changes in Forex and CFD trading

The change will also affect Forex and CFD brokers by imposing leverage limits for trading. The new limits will be as follows:

  • 30:1 for major currency pairs (EUR/USD, USD/JPY. )
  • 20:1 for other currency pairs, gold and main indexes
  • 10:1 for commodities (except gold) and secondary share indexes
  • 5:1 for individual shares and other reference values
  • 2:1 for cryptocurrencies

The restrictions also include a rule of closing a trade at a certain margin based on the account, protection against negative balance based on the account, ban on using incentives by CFD providers and warning from risks associated with specific companies communicated in a standardized fashion.

Today, I’ve read in an article published at FXStreet that people from PurpleTrading simulated a case to demonstrate how trades opened until now might look like under the adoption of the new restrictions. Their verdict was as follows:…The majority of our clients is efficiently using leverages 1:10 or 1:20. These conservative traders will not be affected by the lowering of the leverage limits. These traders will be allowed to continue trading in the same way with the same trade volumes as so far.

What about cryptocurrencies?

Cryptocurrencies represent a different league. Which means that the changes and restrictions mentioned above will apply to each authorized CFD broker (such as Plus500) offering cryptocurrency trading.

Other brokers including crypto exchanges such as bitfinex, coinbase, or binance will not be affected.

Your frequent questions on this topic

When the changes come into effect?

According to ESMA: “The regulations will be published in the EU Bulletin coming into effect one month (binary options) and two months (for CDF) respectively from being published in the official bulletin”. The regulations have not yet been published, so binary options will be offered for trading for at least one month from now.

Does this measure mean the ultimate ban on trading?

No. It doesn’t. The official document says: “In line with MiFIR, ESMA may adopt temporary intervention measures for the maximum of three months. Before the end of the 3-month period ESMA shall consider whether the measures should be extended for another three months.” This means that the ban applies to 3 months, after which the trading of binary options will be possible unless otherwise decided by EMSA.

Can I continue trading?

Yes, you can. As mentioned above you still have some time to enjoy binary options trading in the same way as before. Sooner or later, this type of trading may have vanished. But digital options, Forex and cryptocurrencies will survive.

Is my money at risk?

No, it’s not. This would contradict to the regulators’ ambitions. Your money is yours and nobody will take it from you. If you have your money deposited on a trading account controlled by a broker like IQ Option or HighLow you don’t have to fear. You can continue until the regulation (ban) comes into effect. Then you can either withdraw your money or use it for trading other instruments (forex, cryptocurrencies, digital options etc.)

Brokers to choose from for trading

We advise the same as many times before: Read our list of recommended brokers for binary options, for forex and for cryptocurrencies. We namely recommend the following brokers: IQ Option, HighLow, Plus500, PurpleTrading a CoinBase.

More information below: (to display, click one of the buttons)

  • Statement of ESMA
  • Quite a good video summarising the topic is available at YouTube
  • Message about MasterCard and blocking of transactions of non-regulated brokers
  • Official EU Bulletin

Author

More about the author J. Pro

Unlike Stephen (the other author) I have been thinking mainly about online business lately. I wasn’t very successfull with dropshipping on Amazon and other ways of making money online, and I’d only earn a few hundreds of dollars in years. But then binary options caught my attention with it’s simplicity. Now I’m glad it did because it really is worth it. More posts by this author

Don’t Gamble On Binary Options

There are lots of ways to lose your money in this world but here’s one I hadn’t encountered before: binary option Web sites. They have become popular over the past few years with new ones appearing all the time: anyoption.com, bulloption.com, spotoption.com, binaryoption.com, etc. etc.

The sites appeal to the same type of people who play poker online. But they somehow have an aura of being more respectable because they represent themselves as offering a form of investing. Don’t kid yourself. These are gambling sites, pure and simple. It’s probably just a matter of time before regulators move in on them.

Until that happens, they seem to be doing great business. A Google search for binary option Web sites produced 870,000 hits with promotions like “earn up to 75 per cent every hour” and “81 per cent profit in one hour or less, trade all major markets”. You can buy these options, which are also known as all-or-nothing options, digital options, or Fixed Return Options (FROs), on stocks, commodities, indexes, foreign exchange, and other derivatives.

In fact, you can place a bet (which is what it really amounts to) on just about anything that is publicly traded, depending on which Web site you use (some offer a wider range of choices than others). Some sites provide free guides to binary option trading to get you started.

I was alerted to this phenomenon by a reader who sent me this email:

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“My dad has recently gotten involved with trading binary options online. The basic premise for the site he uses is at a specific time, say 1:25 p.m., you can put down perhaps $100 that XYZ stock will either increase or decrease in price within five minutesby 1:30 p.m. If you are wrong, you get $15 back. If you are right, you win about $70.

“I’ve proven to him that, mathematically, the site has an edge and you must be right 55% of the time in order for your bet to have a neutral expected value. I am also a professional online poker player by trade so I have an extensive understanding of probability, the online gambling markets, and how these sites work.

The problem is he feels he is at a great advantage, citing his ability to read a bunch of charts, follow news, etc. He is a smart man, a former lawyer, and has been following stocks for years, but I feel that he may be overestimating himself here. I’ve looked into online binary options trading a bit and it seems to me that the consensus is that very few people outside of professional traders can beat the trading sites consistently for good money. My dad is up $2,500 or so betting $100 and $50. The best I could do is to warn him about statistical variance affecting his perceived ability and that short-term volatility along with the inherent disadvantage will make consistent winning incredibly hard.

“I’m looking for a way to definitively convince him to stop and that his edge isn’t as great as it seems. I tried talking to him multiple times about the subject but I’m not as knowledgeable about the field and ultimately that becomes my shortcoming when trying to convince him why he shouldn’t continue to be involved with this. Any help would certainly be appreciated.”

I found this correspondence especially fascinating because the writer is a professional online poker player — a gambler by trade. Yet here he is trying to convince his dad that online gambling is a bad thing. I agree, it is. But it’s understandable if the father is skeptical about advice from a son who does the same sort of thing, albeit in a different form.

But that’s for them to sort out. What intrigued me was to discover that binary option trading has become a kind of pseudo investing sub-culture. I went to the site our reader says his dad uses and did some research. It describes binary options as “an exciting new type of investment” — note the use of the word “investment”.

“When a binary option is purchased on our platform, a contract is created that gives the buyer (known here as the investor) the right to buy an underlying asset at a fixed price, within a specified time frame with us, the seller,” the Web site explains. The option must be held until maturity (even if that is five minutes away); unlike regular options it cannot be sold before then.

These sites promote themselves as offering controlled risk (you can’t lose more than a specified amount), low cost, big gains if you guess right, and ease of use — you can trade from home whenever markets are open and set up an account with a credit card.

So what arguments would I use to convince dad to quit? For starters, this sort of thing can quickly become addictive, especially to market junkies. Although the amounts bet may be small, the total can quickly add up if many trades are done in a day. It wouldn’t take long for things to get out of hand.

Second, no one, no matter how knowledgeable, can consistently predict what a stock or commodity will do within a short time frame. Will Apple (AAPL) shares go up or down in the next 10 minutes? Unless there has just been some major announcement from the company, there is no way to even guess at that.

Third, the house definitely has an edge. This particular Web site pays $71 for each successful $100 “trade.” If you lose, you get back $15. Let’s say you make 1,000 “trades” and win 545 of them. Your profit is $38,695. But your 455 losses will cost you $38,675. In other words, you must win 54.5% of the time just to break even.

Finally, these Web sites are unregulated. No securities commission is protecting people’s interests. This is a financial Wild West.

If people want to gamble, that’s their choice. But let’s not confuse that with investing. Binary options are a crapshoot, pure and simple.

Forex Or Binary Options?

Disputes over classics and innovations accompany all spheres of human life and activity. In this matter, the financial markets are not an exception. The emergence of innovative tools on the market – binary options – has led to disputes over all aspects of the situation: which are better, binary options or forex, the classics or market innovations. These questions are of interest not only to private traders, but also to industry professionals. We will briefly analyze the profitability parameters, and the accessibility and ease of processes using these tools, to identify the leader.

Classic Forex currency market

Let’s start with the classic Forex currency market. What we have is a private investor who, in order to gain access to transactions, is required to have a relatively large amount of initial capital. The main trading platforms have minimum conditions for the initial capital at the level of 200-300 dollars! This figure is not so much due to the greed of the brokers, but rather because of the rules of money management that are used in this market area. It simply does not make sense to enter the market with a smaller amount – the level of risk increases significantly and profit volumes fall.

The next parameter is the simplicity of trading processes. It is worth noting that the principle of buying and selling foreign exchange market assets requires the most professional skills from the trader, since forecasting quotes in this case takes on a complex analysis format. Moreover, the exact time period for profiting in this case has quite a few serious criteria – contracts on the Forex market have durations from a few hours to a few weeks, which complicates the work of the trader in terms of the effectiveness of money management. And, of course, the profitability of the tool – traders on the Forex market say that a good result is an increase in their trading capital of 20-25%. You have to agree that those are rather modest results.

Looking ahead, it is worth noting that some of the major players on this market have started to offer binary options on Forex platforms, which indicates a rise in the popularity and effectiveness of binary contracts in private trading.

What does the binary market offer?

Based on the main criteria, the innovative tool for private trading offers the following parameters:

  • Access to the market with minimal investment. For an example, we’ll consider the trading conditions of the leader of the binary market, the Binomo broker. Here, the trading conditions have the following parameters – an initial account of 10 USD, an initial bet of 1 USD
  • As for the ease of conducting binary options trading processes, they also outperform Forex. Here, they utilize short time periods for contracts – from a minute to a day, simple approaches to determining short corrections and trend movements, as well as a simplified format for profiting – a correct forecast brings a fixed profit
  • Yields on binary options also show the highest possible results. Due to fixed rates of profit on contracts at the level of 85-90%, and the quick trading mode, binary options are capable of bringing investors up to 3,000% profit per year

So, in this case, the dispute over “Binary options or Forex” is not quite appropriate, as the innovative tool beats the classic one on all the parameters, and is more profitable for private investment.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Demo Account!
    Free Trading Education!
    Get Your Sign-Up Bonus Now!

  • Binomo
    Binomo

    Good Choice For Experienced Traders! 2nd place in the ranking!

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