Our hunger to earn money sometimes drives us to grab different opportunities that promise a good return on investment. However, some of these opportunities turn out to be scams or unwise investments.
With the recent rise of online trading platforms, you’re probably thinking of trying out this market. On the other hand, you also don’t want to waste your hard-earned funds.
This brings forth one important question. Can you lose money in binary options? We’ll help you find that out for yourself.
Can You Lose Money in Binary Options?
We’re not going to beat around the bush. Yes, you can lose money in binary options trading. However, the word “can” indicates the possibility of depreciating your funds, not the certainty of it.
Multiple factors may affect this outcome, and one of those is your skills. Notice that we used the word “investment” quite a few times at the beginning of this post.
That’s because binary options trading is a form of investment. You need to deposit a specified amount of money, usually at $250, to start trading.
This is where your skills become part of the picture. If you know how and when to invest in a trade, then you will not lose money. On the other hand, random investments will most likely drain your funds.
Your skill is not the only thing you have to worry about if you don’t want to lose your money. You may also want to be wary of the binary options broker or platform that you choose.
What’s a Binary Options Broker?
A binary options broker is a company, or in some cases, two or more companies, that provide investors with a platform in binary options trading. All the transactions and market trades will occur inside the trading tool. To the untrained eye, all of it looks very simple.
You just have to choose whether or not you think an asset will increase its value over a certain period. If you’re right, you earn money; if you’re wrong, you lose it. That said, there are a few things that you need to be wary of.
The Status of Binary Options Outside the USA
Only 10% to 30% of traders globally actually make money in binary options trading. The rest, which is about 70% to 90%, end up losing their investments.
That’s because not all binary options brokers are legitimate. Some of these companies design platforms where they have maximum control of everything.
This means they can manipulate the results and end up collecting all the money of the investors. To make matters worse, some of these companies use the investors’ information for criminal activities.
Some brokers press investors to deposit more funds into their accounts, then later deny their withdrawal requests.
This is often the case for binary options trading in platforms or companies outside the United States.
A Regulatory Body
One major difference between platforms outside and inside the USA is that the US government utilizes an agency to oversee transactions involving binary options.
The Commodity Futures Trading Commissions or CFTC ensures that the public and potential private investors are safe from manipulation, fraud, and identity theft. These criminal activities are often present in unregistered binary options brokers.
Unregulated Brokers
Does this mean you shouldn’t trust any broker not regulated by CFTC or any financial authority? Well, not necessarily. Some brokers may not be under the CFTC, but they’re still legitimate.
One way to easily identify which ones will not withhold your money is through registration. Illegal brokers would usually ask for your bank details, credit card number, and other sensitive information.
Legitimate brokers will have no need for this because they’re not looking to profit by scamming you.
Finpari is a binary options broker, already gained a reputation and an ever-expanding number of clients. You can gain a Finpari login even if you are a non-US resident. Creating a Finpari login only requires your name, residency, and email address.
You can also identify legitimate brokers through their customer service. If they’re easy to get in touch with, it’s a strong indicator that they wouldn’t run with your money.
Invest What You Can Afford To Lose
Nonetheless, you should still keep in mind that even if you join the market through a legitimate broker, it’s still possible for you to lose money. That’s because of the nature of binary options trading.
You either win a fixed amount of money or nothing at all. That’s why you should only invest what you can afford to lose.
The most important thing is to hone your skills and find a legitimate binary options broker to get you started.
Conclusion
We all have dreams we want to fulfill for ourselves and our families. That’s why we’re always looking for the next opportunity to earn money. While there may be thousands of them out there, online trading seems to be one of the most viable.
Can you lose money in binary options? Certainly. Can you multiply your money and earn thousands of dollars through this investment? Just as likely.