Is Binary Options Gambling?
July 27, 2013 by Terry posted in • No Comments
Binary options were originally constructed to be as simple to understand and implement as possible. However, some of key attributes that they now exhibit as a result of these stipulations have caused numerous professional traders to categorize them as a type of gambling. Is this assessment valid? To acquire a rational answer, let us study the intricacies of binary options in more depth.
The Focal Point of the Gambling Debate
The primary aspect, which is the main center of this gambling deliberation, is that there are only two potential eventualities whenever you trade binary options. Either you will succeed and close ‘in-the-money’ or fail and finish ‘out-of-the-money’. To attain the former outcome, you will have to successfully forecast in which direction, i. e. downwards or upwards, the price of your chosen asset will progress by the end of a specified time period.
This is the foundation of the debate because many experts evaluate this type of decision processing to be the equivalent of playing a casino game, such as roulette, during which you need to select either red or black. In an identical way to losing or winning depending on which of the two colors the roulette ball finishes on, your success at binary options trading is reliant on you successfully forecasting whether price will climb or decline.
Consequently, many authorities regard binary options trading as just another gambling pursuit used by pundits attempting to acquire fast profits. Enhancing this viewpoint even further is the fact that the Inland Revenue departments of many countries do not also classify binary option trading as a proper financial investment and, as such, do not tax it.
In addition, your decision processing could scarcely be any easier when trading binary options as you are required to just choose if price will advance either downwards or upwards. You are not even required to undertake any serious due diligence on your selected assets in order to attain success.
Why Binary Options is not Gambling
In contrast, other revered analysts are prompt to dismiss this gambling verdict. They have adopted this viewpoint because you must specifically acquire a win-to-loss ratio between 55% and 60% in order to just breakeven over any specified period of time. This is because you will only receive payouts between 70% and 85% when your positions close ‘in-the-money’ compared to losing between 85% and 100% when ‘out-of-the-money’.
This vitally important feature implies that utilizing a continuous gambling approach to your binary option trading will only produce a sequence of sizeable losses over the long-term. As this approach is doomed to fail, professional traders recommend that you should learn how to deploy advanced strategies and methodologies in order to pull the odds back into your favor with the intent of securing worthwhile profits consistently.
Why you should Learn to Trade like an Expert
What are the benefits of developing a professional mindset. To answer this question, you need to study the following list that identifies the main attributes that traders experience once they have successfully accomplished this task:
1. They maintain an open mind to their trading activities as opposed to being dogmatic.
2. They will learn from the trading experiences of others but never mimic.
3. They know how to trade with the trend as a natural course of action.
4. They will view winning and losing as central components of their trading strategies .
5. They enjoy binary options trading because it does not cause them any stressful emotions.
6. They are in complete control of their trading and do think that it is haunting them.
7. They know when to seek new education to improve or augment their skills.
8. They have a well-developed understanding of risk and money management concepts. As such, they never worry about their equity because they know it is well protected.
9. They possess an in-depth appreciation of leverage and always ensure that they never overtrade.
10. They know how to tweak and calibrate their binary options trading strategies so that they can enjoy the immediate benefits every time they perform such tasks.
As you must acknowledge, achieving the mental nirvana described in the last list is definitely a target worth working for because an expert’s mindset is a place of profitability, tranquility and harmony.
Developing a Powerful Trading Psychology
Many professional traders instruct that your trading psychology will strongly affect your capability of trading binary options successfully. Consequently, you must prepare yourself for the task ahead by enhancing your mentality so that you can readily deal with all the pressures and stress that the financial markets can generate. You can prepare yourself better for the battles ahead if you simulate live-trading as closely as possible from the outset.
For instance, there is no point just using a demo account unless you trade the exact strategy you intend to use when you start real trading. Otherwise, you will be practically wasting your time because you will not be subjecting yourself to the emotions and stress that will affect you psychologically when you go live. In particular, you must develop your psychology during these early stages so that you can trade with the levels of discipline, dedication and persistence that are necessary to guarantee success. You will then be able to study trading situations more objectively and produce improved quality trading decisions.