Is Binary Option Trading Legit, a Scam or Gambling?

posted in: Binary Option Trading | 7


A Close Look Into Binary Options Trading By A Novice Trader

is binary option trading a gamble
Only 2 possible outcomes – UP or DOWN!

Initially introduced as Digital Options, trading in “Derivatives” has been around for quite some while. BINARY means “2 Values” and in the case of Binary Options it means “value UP” or “value DOWN”.

Binary Options have been a hit among a new breed of traders which are willing to take a high risk with their investment, hoping for quick profits. Until very recent, this form of trading was not well known by the general public.
It was kind of an “exclusive playing ground” for experienced traders, hedge fund managers and folks with plenty of money.
However, over the past 12 months or so, the public was made aware of this industry. But for the wrong reasons. Unscrupulous internet marketers flooded the web with misleading information and products, giving the whole industry a bad reputation. Searches on Google and YouTube produce hundreds of Binary Option Scams. More about these in a later chapter.

What exactly is Binary Options Trading?

When trading the traditional way, you actually purchase and own the commodity or asset. You make money only when the value of the asset increases.
When trading binary options, you will not purchase and own any commodity or asset; you would actually bet on whether the derivative (underlying asset) will gain or lose on value during a set period of time. You can make money even if the asset loses on value (if you predict the outcome correctly).

Is Binary Option Trading Regulated?


choose a regulated brokerUntil 2008 there was no regulation of Binary Options Trading, which is now under regulation by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) is a government agency that oversees the regulation of futures, options and swaps trading on regulated U.S. exchanges.

Before regulation by the U.S. Securities and Exchange Commission (SEC) in 2008, binary options were offered by individual brokers, most of them operating out of Cyprus, the Philippines or Malaysia. 
These individual brokers make their money from the difference between the payout on winning trades (usually 75%-80% of the wager) and what they collect from the losing trades (100% of the wager). Their payout structure is “all or nothing” and you must hold the option until expiry time (called “strike time”).
CBOE(Chicago Board Options Exchange) & NADEX, on the other hand, offer increased protection for the traders. Both are subject to oversight by  the CFTC and ARE NOT BROKERS but “Exchanges” and make their money from a set exchange fee and not from the losses of the trader. You also can exit before expiry time of the option; meaning you are able to exit and take a smaller profit or limit your losses.

Binary Options Brokers Serving US Traders

Until the middle of 2013 only a few dozens of dedicated binary option brokers competed aggressively in the US market. However, regulatory restrictions make it very difficult to operate in the US and most reputable and reliable brokers stopped serving US clients. This opened the doors for lesser reputable brokers to enter the US market.
Currently, there are more than 200 brokers competing in the binary options industry which makes it very difficult for US traders to find reliable and reputable brokers with state-of-the-art trading platforms. 
For example: Banc De Binary Europe, by many heralded as one of the best brokers worldwide, had to cease serving the US market. The SEC & CFTC  require Banc De Binary to register with their agencies and also to revise their “Bonus & Withdrawal policies”
banc de binary statement
To read the full statement, click on the image
A very high number of complaints, a flawed withdrawal process and suspect bonus system led to Banc De Binary’s problems with the SEC. You find more information about withdrawal problems following this link. 

US Regulated Binary Options Brokers

It sounds surreal, but THERE IS NOT A SINGLE US REGULATED BROKER other than NADEX. Most brokers are registered in Cyprus and regulated by the The Cyprus Securities and Exchange Commission (CySec). The island of Cyprus is a full member of the European Union (EU) and was the first country to regulate binary option trading.
One can argue if the rules and regulations are adequate and up to par with European or US standards. Fact is however, that CySec does make efforts to prevent outright scams and illegal activities by brokers.
Read more about CySec regulations here. This link provides an updated list of all brokers registered and regulated by CySec (currently 179 brokers).
So, there are no US registered or regulated brokers. This may or may not change in the near future and that leaves us (me) with the task of finding the most reliable and reputable broker.

Recognizing Binary Option Scams

Insured profits video screenshot
Insured Profits Sales Video – A Binary Options Scam

Until about one year ago, I was not aware of the Binary Option Trading industry. That changed rapidly when internet marketers flooded the web with products that, supposedly, will make you a million dollars in profits by trading binary option.

Some claimed to have some kind of “miracle software” that can predict the fluctuation of the market, others “found a loophole” in the brokers software and similar misleading nonsense.
These are outright SCAMS. True, all brokers use some kind of software that will give “trend signals”  of the market. But there is no software that can predict the market correctly all the time. 
A new scam of this kind seems to pop up every week now. Fancy names like “Insured Binary Profits” and “Binary Cash Creator” are supposed to lure you into opening an account with a broker, and the creator of the product, and his affiliates, receive a hefty commission (usually the full amount of the minimum deposit required).
Simple Google searches like “insured profits scam review” will yield a great number of so called reviews. Believe me, most of them are not really reviews, but sales pages from affiliates trying to make a fast buck of you (find all my honest reviews here).
Recognizing these scams is actually simple. Reputable and reliable brokers will not promise that you are going to make huge profits all the time. In fact, they will warn you that this kind of trading is risky and you may lose your money.

How To Find The Best Binary Options Brokers?

This is not easy, especially for a newcomer like me. To be honest, I had to rely on the judgement by folks that have experience and are willing to share their knowledge. Scouring the internet for more than a week, reading reviews and opinions, hundreds of complaints and reports of wrong doings, I had to make a decision.
I found several websites that provided helpful information and seemed to be neutral, meaning not associated with any particular broker. Most helpful was a site called “Binary Options That Suck“. I recommend you visit there if you consider to jump in and try your luck.
Finally, after a full week of research and weighing all the different opinions, I made the decision to open an account with “Redwood Binary Options“.
My choice to try trading - redwood binary option

My Experience As Binary Options Trader!

After parting with $500.00 of my hard earned money, I was officially a BO Trader. But I was not trading just yet. I already made up my mind to concentrate on “currency” and spent three full days to learning as much as I could, observing the market fluctuations, watching signals and so forth.
My main focus was on the software signals and how the market actually moved. Then on November 3, 2014 I entered the trading action. I stayed away from the 60-second trades and choose strike times of 15 and/or 30 minutes. The minimum bet is $25.00 and the payout is between 70% and 85%.
Although Redwood advertises payout rates of up to 87%, I noticed that most currency trades had a payout of 75%. Below is a chart that shows you my trades and the results.
Binary Option Trading – Real Results
Date Asset Signal Time Expire Time Direction Target Price End Price Result Bet Balance
11/03/14 USA/CAD 12:15 12:30 DOWN 1.12696 1.12815 LOST $25.00 $475.00
11/03/14 EUR/AUD 1:17 1:45 DOWN 1.45366 1.45279 WON $25.00 $493.75
11/04/14 AUD/CHF 8:11 8:30 UP 0.82740 0.82676 LOST $25.00 $468.75
11/04/14 GBP/USD 9:02 9:15 UP 1.56488 1.56388 LOST $25.00 $443.75
11/05/14 EUR/AUD 7:26 8:00 DOWN 1.44988 1.44830 WON $18.75 $462.50
11/05/14 AUD/USD 7:54 8:30 UP 0.85638 0.84979 LOST $25.00 $437.50
11/06/14 AUD/CHF 7:03 8:00 DOWN 0.82979 083064 LOST $25.00 $412.50
11/06/14 AUD/JPY 7:09 7:45 UP 101.265 101.193 LOST $25.00 $387.50
11/06/14 AUD/JPY 7.16 8:00 DOWN 101.209 101.352 LOST $25.00 $362.50
11/06/14 CAD/JPY 7:48 8:15 DOWN 102.408 102.419 LOST $25.00 $337.50
11/10/14 USD/CAD 11:04 11:15 UP 1.13109 1.13266 WON $50.00 $375.00
11/10/14 USD/CAD 11:09 11:30 UP 1.13301 1.13418 WON $50.00 $412.50
11/11/14 USD/CAD 9:09 9:30 UP 1.13479 1.13423 LOST $50.00 $362.50
11/11/14 USD/CAD 9:13 10:00 UP 1.13498 1.13462 LOST $50.00 $312.50
11/12/14 EUR/GBP 8:17 8:45 UP 0.78864 0.78947 WON $50.00 $350.00
11/12/14 EUR/GBP 9:24 9:45 UP 0.78908 0.78834 LOST $50.00 $300.00
11/13/14 USD/CAD 8:23 8:30 UP 1.13404 1.13511 WON $50.00 $337.50
11/13/14 USD/CAD 9:30 9:45 UP 1.13508 1.13487 LOST $50.00 $287.50
11/14/14 AUD/NZD 7:23 7:45 DOWN 1.07967 1.08042 LOST $50.00 $237.50
11/14/14 AUD/USD 7:31 7:45 DOWN 0.83589 0.83712 LOST $50.00 $187.50


November 6, 2014: Trading four days and placing a total of 10 bets, I won ONLY two times and lost a total of $162.50. 

Friday, November 7, 2014:  A NON-TRADING DAY for me. I decided to take some time off of this “business” and watched a handful of very interesting tutorial videos to gain more knowledge about binary trading.

Consulted with customer support. Barb, a nice lady advised me to concentrate on USD/CAD and EUR/GBP and raise my bets to $50.00. Have to think that over though. Am I willing to take this risk?

Monday, November 10, 2014: Good day. Followed Barb’s advice, raised my bet to $50.00 and won both bets and received a total of $75.00 in return. Breathing a sigh of relief, I am planning my trading strategy for tomorrow.

Tuesday, November 11, 2014: Bummer! The USD/CAD bets cost me a Franklin. Not good, not good at all. What’s wrong with the software and the signals? 

Reading more stuff. Something like “Intraday bias remains neutral and more consolidation could still be seen. But recovery should be limited by 1.13479 resistance and bring fall resumption“. 

What does all this mean? “limited by xxxxx resistance“. Oh my, am I in this way over my head or what? I place another call to get some more advise from nice lady Barb. As my luck has it, a grumpy old buff answers. Tells me to hang in there and follow the signals precisely. Humph, THAT’S WHAT I DO…..follow the darn signals. Oh well, for sure better luck tomorrow.

Wednesday, November 12, 2014: One win, one loss…….but overall a $12.50 loss for the day and my bankroll is down to $300. 

Thursday, November 13, 2014: Same result as the day before, a virtual tie but still losing $$$$$

Friday, November 14, 2014: I followed the signal and the signal was wrong, again!  I HAVE HAD IT! 20 trades, 6 wins vs 14 losses by following a stupid signal. Or maybe I can’t read. Whatever it is, I am done with this game (for now at least)!


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Conclusion to Binary Option Trading

making money with binary option tradingObviously, my experience was not a pleasant one. I lost $312.50 by following a signal that was more often wrong than right. But I cannot blame the computer for it. I know that software that can predict the “unpredictable” does not exist. This became clear when I read this note about “resistance”. 

“Who is resisting what”, I asked myself. The currency is just a “thing” an cannot think, but the folks with the big money behind them, are the ones that steer currencies (and other commodities as well) in the direction they want them to go.

Just think about this hypothetical scenario for a moment. A fund manager with access to 1 billion dollars receives 1/2% commission from the capital gain the trades accumulate. Some time ago, he spent 500 million on Australian dollars, 80 cents for 1 AUD. He is now holding 625 million Australian Dollars and will sell the lot for 85 cents per AUD (making him a healthy $150,000.00 commission)

There are fund manager looking to buy AUD for their clients, but they resist the 85 cent offer. The AUD is hovering at 0.84075 and the buyers are willing to pay 84 cents. The seller also is resisting, for a while at least. The computer, unaware of all of this, follows the latest trends, which were UP and sends his signal.

John, that’s me, who has not read the book “Binary Options Trading for Dummies”, follows the signal. One minute later, the AUD seller does not resist anymore and sells the lot for 0.84050. He makes a little less than $150,000.00 commission, the AUD will follow the downward trend for a while longer, and John just lost another $50.00.

And so the story goes. This is just a little example of the little things a software program cannot foresee or predict to happen.


Now let me answer the big question: Is Binary Option Trading Legit, a Scam or Gambling?


  • Binary Option Trading is LEGIT
  • Binary Option Trading is NOT a SCAM (although some shady characters use it for their scams)
  • Binary Option Trading is GAMBLING (and the odds are worse than in casinos)


I believe that people do make money trading binary options. I also believe that these people do not rely on a computer signal. These folks are traders with a lot of experience and excellent knowledge of the inner workings of world finances. Even they lose trades on a regular basis, but they have the know-how and the funding to overcome losses.


What’s Next?

As far as I am concerned, I am done with Binary Option Trading. I just relax and keep on making money online as internet marketer. I learned how to do that at Wealthy Affiliate, the best online learning center in the world. 

If you are interested in earning money online with your own home business, I recommend you check out my Wealthy Affiliate Review for all the details.


profil_johnI am John, the owner of this website. I hope you enjoyed my report about Binary Option Trading. If you have any questions, please leave a comment below and I will get back with you asap. 



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7 Responses

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  4. Babenchuk

    Long thought a binary option to choose and did not know any better, but drank a little information from the Internet, and it is from this article site, and I realized that will choose for yourself. Maybe someone you need to, use.

    • Thanks for your input, I appreciate it. I agree that some, and I repeat that, some very experienced traders with big budgets will be able to make some profit. We, on the other hand, have to rely on ‘computer programs’ that are able to ‘predict what the market will do in the next 1/2 hr or so’. I found that the ‘trend fortune tellers’ are wrong way more than right.

  5. Andrea Blunt

    There are many binary options companies which are not regulated all around. Most of these offshore companies are not supervised, connected or affiliated with any of the regulatory agencies such as the Commodity Futures Trading Commission (CFTC), National Futures Association (NFA), Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA). Please If you have lost a reasonable amount of money to an untrusted broker, email me on for full assistance on how to get your money back.

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