Is Binary Options a Legitimate Trading Tool or a Scam?

Posted on May 16, 2012 by JD

Before we analyze whether binary options is a scam or not I would like to take a look at day trading, an area which I have much experience, and see if day trading would qualify as a scam.

As a day trader many people looked  upon what I did with skepticism. Many thought that day trading was just a another form of gambling. Many trading companies would try to lure people with the potential to earn a living with electronic day trading with very little investment. The truth is, for the overwhelming majority of people, day trading was a losing effort. Few traders were successful; most lost money. The firms made a lot of money collecting commissions and profit share from the good traders. After my first year of day trading I was convinced that it was impossible, or nearly impossible to make money. I began back in 2002, after the bubble burst and volatility was at a virtual standstill. Few traders were making money with any of the traditional trading formulas that worked a few years earlier. I was fortunate enough to come upon someone who had a “system”. The trading system provided an “edge” in the market. When traders diligently followed the system they consistently made money. When I began trading with the system I made money on a consistent basis. I opened trading floors to teach others to trade within this system, but most did not made money. Trading within this system required extreme discipline both to enter a position and to leave a position when the rules required. Those who followed the rules diligently made money. Like most professions, one needs education or skills to make a living. The same is true with day trading. Along with these skills a person must have the proper discipline in order to succeed. Its a business that is clearly not for everyone.

The same can be said for Binary Options.  The companies that set up binary option platforms and binary option brokers are in this business to make money.  The firm collects 80- 100% of a losing trade and pays out 60-80% on winning trades. Someone who wins on 50% of their binary option trades will lose money. Unless someone has a system that has a winning track record and the person adheres to that system consistently he will over the long term win on 50% on his trades and lose money.

Of course it is possible that some of the binary option brokers in the market are making promises that they cannot or will not fulfill. If a broker makes false assertions or won’t refund deposits or payout profits to a customer then that broker may be considered a scam. The binary options trading industry itself is not a scam. It may be difficult to actually profit trading binary options, but the risk and rewards are clearly displayed for the investor. Whether one makes money or not is up to the actual trader. Over the next several weeks we will begin a series of comprehensive reviews of binary brokers. We will determine, to the best of our ability, if the brokers are providing the services that they claim to offer.  Once you have the confidence that a binary option broker is providing a legitimate service you will then be able to implement a trading style that most effectively yields profitable trading results.

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Binary Option Broker Reviews

Posted on May 3, 2012 by JD

After completing our summary of the various Binary Option Trading Platforms, in the coming days we will begin our comprehensive review series of the Binary Option Brokers on the market. We will be looking at the brokers in terms of features and performance. Opening accounts, depositing and withdrawing funds will be tested. Customer service will be rated as well.  The first group of brokers we will be analyzing are as follows:

GlobalTrader365

AnyOption

OptionFair

TradeRush

BancDebinary

24Option

OptionBit

Binary Option Broker Reviews will begin with a summary of the features purported to be offered.  We will then summarize the veracity of these claims based on a detailed hands on study of the brokers functions.

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Binary Option Platform Review Guide

Posted on February 29, 2012 by JD

In the coming weeks we will be presenting a comprehensive review of a series of Binary Option sites to give traders a feel for the different types of Binary Option brokers on the web. Before we begin to review individual Binary Option brokers we will be taking a look at the Binary Option trading platforms which are on the market.

What is the difference between a Binary Option Platform and a Binary Option Broker?

The platform is the system or technology used by a particular broker. There are about six companies that develop sites that allow for Binary Option Trading. The overwhelming majority of Binary Option Brokers are “white label” products. This means they are just using the technology or trading platform of one of these six sites and re-branding it with their own name.

It is therefore important to have an understanding of the different platforms, how they operate and what features they offer. Once you decide which platform makes the most sense for your trading needs it becomes much easier to choose a broker.

The six platforms that we will be looking at are as follows:

In the coming days we will post a review of each of the above platforms.

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Lin-vesting: Can Sports Affect the Markets

Posted on February 23, 2012 by JD

In a previous post titled Binary Options and The Super Bowl I did a study to see if the big game had any effect on advertisers stock prices. The latest sensation to hit the sports world comes in the form of a previously little know 6’3″ asian american point guard from Harvard named Jeremy Lin. The story actually transends sports and is actually a great human interest story. It’s about the marriage between an unknown underdog athlete and a world famous proffessional sports team on the brink of disaster. It would be great to see if a sports story of this magnitude has any effect on the financial world.

Lets begin with the team. The New York Knicks are one of the premier franchises in all of sports. Despite not being a particularly successful team, as they have only won 2 NBA championships in their 65 year history,.  they have been routine playoff contenders- until recently. Throughout the 80′s and 90′s tickets at Madison Square Garden for Knick games were sold out every night.  Coupled with their die hard fans’ intense enthusiasm for the team and the buzz of the celebrity filled front rows of the arena each game at the garden was crammed with tremendous excitement. Their playoff battles with Michael Jordan’s Bulls and Reggie Miller’s Pacers were epic. Nothing compared to the juice in the garden those years.

Players aged. Their top player Patrick Ewing was traded. The team started losing. The Knicks were not just any team. In New York, with a history of success, they could not afford to be a losing team. So they added one high priced free agent after another until they were way over the salary cap, prohibiting them from signing any more players. Unfortunately the team never jelled. They were a high priced, losing team with rapidly waning fan interest. Suddenly the arena wasn’t sold out. The celebrities stopped coming. The juice was gone.

Finally they decided to break down the team. They got rid of all high priced players and stopped signing aging, overated stars. Their mission was to get under the salary cap at all cost so they could sign new young all star talent. By the summer of 2010,  after a decade of losing they finally were under the salary cap. They signed and traded for two young all star players in their prime. They started winning again. They made the playoffs and the buzz was back in the garden. In the summer of 2011 they signed a third player. Experts thought the team was ready to make a serious championship run.

After two months the team was in disarray. With an 8-15 record, star players Carmelo Anthony, Amare Stoudemire and newly aquired Tyson Chandler were unable to gel. Incredibly, after years of breaking down the team to get under the salary cap to sign these star players, it was the same old high priced, losing team with rapidly losing fan interest.

Now the player. Jeremy Lin always had a high level of ability, he just doesn’t possess the obvious physical skills that scouts looks for when evaluating talent. Unable to gain an athletic scholorship of his choice he chose to go to Harvard. His college career was impressive, but Ivy league players almost never get drafted by NBA teams. He showed promise in summer league games and signed a contract with Golden State as an undrafted player. Although popular with the Asian community of San Francisco he sat at the end of the bench for most of the season. Before the 2011 season he was cut by the Warriors and signed by the Houston Rockets only to be waived by them as well before the season started.

The Knicks needed help at point guard because of injuries and poor play. They signed Lin on December 27, but again he rarely played. By February 10 his contract was set to be guaranteed, so the Knicks had plans to cut him and sign a different player. About to be cut by a third team in less than a year, sleeping on his brother’s couch at night, Lin was at a low point. As we recall; however, the Knicks were in even worse shape. On February 4 in a game against the lowly New Jersey Nets the Knicks were struggling again and were about to lose their 10th game out of their last 11. At halftime Carmelo Anthony suggested to coach Mike D’antoni (who was on the verge of being fired) to give Lin more minutes. He ended up with 25 points and 7 assists as the Knicks came back and won the game. Lin started the next game and again scored over 20 points as the Knicks won again. The team won their next 5 games with Lin starting. He outplayed superstar Kobe Bryant and scored 38 points in a win against the Lakers and won a game with a last second 3 pointer against Toronto. He scored more points in his first 5 career game starts than any player since the NBA-ABA merger. The garden was rocking again with energy reminiscent of it’s former glory. This young, unheralded Asian American kid from California saved one of the most celebrated sports franchises.

The question begs to be asked. Does a story like this have any effect on the financial world? Usually it would have little or no effect, but this situation is somewhat unique. The Knicks are one of the only professional sports teams to be part of a publicly held corporation. The Knicks are owned by The Madison Square Garden Company (MSG). MSG owns the garden, MSG sports network, the Knicks, the Rangers of hockey, and some other entertainment assets. On February 3rd at the close of trading MSG shares were at $29.32. After 6 days of “Linsanity” the stock closed at $33.18 for a 13% move. There is a caveat to this. It’s not simply a matter of investors buying the stock because the Knicks are now winning and have this new marketable star. MSG had been  in negotiations with Time Warner  asking for higher subcription fees to broadcast their channel on the TW cable system. This sudden explosion of interest in the Knicks resulting in a 65% increase in their ratings can only have helped their negotiations with Time Warner and the new deal which was signed earlier this week can only have helped improve the bottom line of the company. So far it appears that in this one instance a dramatic sports story can effect a company’s stock price. As we see though, it was a combination of events which seemed to cause the stock spike. Ultimately, even MSG co. will be priced according to it’s bottom line financial information.

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History of Binary Options

Posted on February 20, 2012 by JD

With shrinking opportunities for the average person to make high returns with limited capital investment, new forms of online trading have emerged. One of the most popular is Binary Options.  In reality Binary Option contracts have long been offered OTC (Over the Counter) and were considered “exotic instruments” in that there was no liquid market to trade the contract itself.

In 2007 the OCC (Options Clearing Corporation) proposed a rule change to allow binary options.  The SEC followed up in May 2008 with an approval to list cash-or-nothing binary options.  The AMEX, CBOE and Nadex all currently offer many types of Binary Options.

In mid 2008 websites offering online binary option trading platform began to operate. These are the Binary Option Brokers.  They offer a simplified version of the exchange traded binary options. The average investor is once again able to trade multiple types of financial instruments without investing large amounts of money and potentially gaining large daily returns.

Some people would like to derisively claim that the origin of Binary Options dates back to the “Bucket Shops” which existed in the late 1800′s -early 1900′s.  The bucket shops allowed for people without a lot of money to trade stocks.  It also allowed for much quicker transactions as no actual shares of stock were traded.  Orders were placed with the shops based on the stock quotes listed on a board, as the price of the stock went up the house owed the customer money as it went down the customer owed the shop.  Transactions could be placed immediately as no calls had to be made to the trading floor for the actual purchase or sale of the stock. In practice the system was similar to electronic day trading, where trades are executed immediately by means of computer trading platforms.  Bucket shops became illegal in most states by the 1920′s.  Great pressure was placed by the stock exchanges to put the bucket shops out of business as they affected actual trading volume.  The truth is that bucket shops were not regulated and were subject to many fraudulent practices by the shop owners.  The tape was often times manipulated.  Shop owners would often times place actual trades to affect stock prices.  Trades were done on strict margin so if a stocked dipped below a traders margin he would lose all his money.  Since most stocks fluctuate throughout the day many traders would be priced out because of these fluctuations.

In reality, these shops were considered by many to be the fore bearers to modern day day trading, where stock speculators would place bets on the price movement of particular stocks.  With the demise of bucket shops day trading did not reemerge in force until the late 90′s.  The advent of ecn’s, discount brokers, SOES and the dot.com boom in the stock market led to a boom in day trading.  By 2000  it was understood that most .com companies would run through their cash without ever showing a profit, the market crashed and most day traders lost their money.  Day trading has lingered for the last decade without ever coming close to its popularity from the late 90′s.  Originally lack of volatility and later a preponderance of programmed trading have have helped to choke off the success of even the most seasoned day trader.

In the article Why Trade Binary Options?, I explain how the high reward, quick time frame, low cost investment of a binary trade compares with traditional option or straight equity trades. In a follow up article I will compare and contrast the different types of binary trading platforms available in the market today.

 

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Global Trader 365 Added to Trade Opus

Posted on February 15, 2012 by AG

Trade Opus has added information about Global Trader 365.

Global Trader 365™ is an innovative consumer trading platform offering clients an easy and intuitive way to trade on leading financial markets – Forex, Commodities, Indices or Stocks. Since establishing their business, Global Trader 365™ has built a loyal base of clients by drawing upon their expertise to provide exceptional software and uncompromisable service for trading Binary Options.

Global Trader 365™ is suited for both private and institutional investors worldwide. Their advanced trading platform is 100% web based, and does not require a software download. Their pricing and execution modules create a new standard in the online trading market. Their interface is self explanatory, easy to use and customers have access to the world’s largest financial markets. Their platform utilizes the most advanced and stable technologies to assure your safety, satisfaction and best overall user experience.

Binary options – also known as digital options or fixed return options – are becoming more and more popular and are in considerable demand. The advantages are clear – your risk & return is known in advance, there are no liquidity or execution issues and Global Trader 365™ has unsurpassed speed and efficiency when it comes to account deposits and settlement.

Global Trader 365™ manages their liabilities and exposures carefully and guarantees payouts of your profits according to our terms. Customer’s deposits are held in a separate trust account and will never be used for any purpose other than trading options on Global Trader 365™’s website.

Web Site: www.globaltrader365.com
Trading Platform: Spot Option
Options Offered: Binary, Option Builder, One Touch, 60 second, Roll Over, Double
Payout Percentage: 70% – 80%
Expiry Options: 15 min, custom up to one day, 60 second
Web Site Languages: English, French, & Chinese
Customer Support: English & French
Payment Options: CC, Wire
Bonuses: Up To 35%
Current Bonuses:
To Start Trading with GlobalTrader365 please click here.

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Futures Up on News From Greece

Posted on February 13, 2012 by AG

All major indices futures are up pre-market today, Monday February13 as Greece’s parliament approved strict financial reforms needed to obtain its latest international bailout package. As we had noted in previous posts, the uncertainty of the ability of Greece to get funding was weighing heavily on the markets. Time will tell…

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February 12, 2012 Market Week Preview

Posted on February 12, 2012 by AG

As we prepare for the upcoming trading week, here are some stories to follow:

  • Greek Prime Minister Lucas Papademos told lawmakers that they should back the unpopular international financial rescue or risk the country falling into, “uncontrolled economic chaos and social explosion”.  In response to the news from Greece the US markets fell:
  • All but one of the 30 DOW components were down on Friday 10, 2012.
  • All 10 sectors of the S&P were down on Friday February 10, 2012 leading to the biggest percentage loss for the S&P so far in 2012.
  • The CBOE Volatility Index (.VIX) jumped 11.6% which was the biggest rise in three months.
  • Thomson Reuters / University of Michigan shows that overall index of consumer sentiment fell to 72.5 in early February from 75 in January.  This is partially due to households struggling due to heavy debt load and declining housing prices.
  • The Trade Deficit widened to a six month high of $48.8 billion and the US trade deficit last year was a record $295.5 billion.

It will be interesting to track the financial markets coming off of their losses on Friday.  The indicators listed above are not the only ones that will affect the market this week but they do look bleak.

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February 6, 2012 Market Update

Posted on February 6, 2012 by AG

International stock indices rose on Monday, February 6, 2012 after U.S. unemployment fell to its lowest in three years, suggesting a stronger recovery in the world’s No. 1 economy that could benefit the region’s exporters.  Some of the rising indices are:

  • Japan’s Nikkei 225 rose 1.1% to 8,931.81
  • Hong Kong’s Hang Sang which rose .5% to 20,862.18
  • Australia’s S&P ASX/200 added 1.1% to 4,295.20

This coming Friday we will receive reports about consumer sentiment and the nation’s trade balance.  We will also receive earnings reports from DOW stocks Coca Cola, Cisco and Disney. We anxiously await these reports to see where the market will trend.

As we move through the coming weeks we should keep an eye on a few other news items:

  • Debt crisis in Europe: Greece national debt is in need of a write down and another bailout.
  • China’s inflation and trade balance.  Although it looks like China’s inflation has peaked,  the International Monetary Fund has cut the forecast of China’s economic growth to 8.25% from the 9% projected in September.
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Bull Market 2012?

Posted on February 5, 2012 by AG

In my last post named The January Effect 2012 I discussed the mixed signals related to January 2012 and the advances the market had made in the most “bullish” January in 15 years.  There are many indicators that this could be a Bull Market with more upside to come.  Some of these indicators, but not limited to these, are:

  • The NASDAQ is at an 11 year high.  This could be due to the optimism in the labor market as unemployment rates dropped to 8.3% which is nearly a three year low.  The gain in employment was the largest since April and it far outstripped the 150,000 predicted in a Reuters poll of economists.
  • More than 450 stocks hit their 52 week highs including stocks like Apple, United Parcel Service and MasterCard.
  • 74% of stocks across all sectors are above their 200 day moving average.
  • Growth in the Service Sector is at it’s highest level in a year.

It will be interesting to follow these trends as they advance through the remainder of 2012.  Many say that due to the factors above as well as others, the Bull Market is going strong.

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