After the collapse of MMM Zimbabwe in August, Zimbabweans have not run out of ideas on how to lose money online. Zimbabweans have tried almost anything that comes there way and for most of them it has not been all rosy. One of the Things I have seen about Zimbabweans is that they are gullible. For example the Chiuta craze (Quail birds craze).
“The sites [Binary option brokers] 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.”
Gordon Pape, “Don’t Gamble on Binary Options” ( Forbes ), 27/07/2010
For those new to Binary trading, Binary Trading works in much the same way as a roulette: if your prediction is wrong, you lose all the money you risked, but if your prediction is right, you receive your money back plus a return. A mutual set-up is for the trader to make 70%-80% of what they bet on any trade that they get right. For instance, if a trader puts in $100 dollars betting on the value of the USD/EURO going up, and the guess is correct, he would receive $80 dollars plus his initial investment. If the value of the same currency drops, however, the trader loses 100% of the money that they put in.
The main different between Binary Trading and Forex Trading is that Forex trading allows players to set their own profit targets vs. stop loss orders, traders can still make a profit even if they do not win the majority of their trades.
One other thing to remember is that trading in binary options only contains the price of underlying asset, but not the asset itself. You might be trading binary options for the price of Google or Apple stocks or gold, but traders never owns any of these assets.
Forbes issued a strong warning against binary options. He claims that this form of trading appeals to the online poker crowd and market junkies who tend to be more exuberant in taking chances than the ordinary investor. In fact, he refuses to acknowledge binary options trading as legitimate investment. He insists that it is a pure gambling activity where the odds are stacked against the investor.
Forbes claims, as do others that you need to win 54.5% of the time to just break even. For some, these odds are good enough, even if the house gets the better deal. For the house, it’s like having hundreds of slot machines that won’t ever pay out a jackpot. For the investor, on the other hand, binary options multiplies his chances of winning each time he cranks the machine. Not the jackpot, maybe, but big enough if one keeps at it and does the homework.
