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Kristian Wright 23 / May / 22

Why are binary options a very risky investment?


Forex, Binary Options: High Risk Trading!
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The End of Riskiest Binary Options and CFD Marketing

To protect depositors from the dangers of these particularly risky speculative instruments, binary options marketing is banned in France from July 2, 2018, and marketing of the most risky CFDs from August 1, 2018.
Only CFDs can be traded with a relatively low leverage effect. The limit differs depending on the financial market. For example, in Forex (a market where international currencies are traded) for CFDs on the most important currencies, this is 30. It is 5 for Stock CFDs and 2 for Cryptocurrency CFDs.

Forex, binary options, what are we talking about?

Forex, unregulated market

Forex (foreign exchange) is a market where currencies from all over the world are traded 24 hours a day, 7 days a week. This market is not regulated, unlike, for example, the stock market. : this means that prices are set directly by various professional stakeholders (banks, financial institutions, etc.). Therefore, permanent changes can be made to it.

Binary options, profit or big losses

Binary options are trading "tools" that allow you to speculate for a very short period of time (a few minutes, a few hours, etc.) on the evolution of a security (stock, currency, stock market index, etc.) etc.) with two possible outcomes: the rise or fall of this title.

If the "trader" foresaw this development, he receives a predetermined benefit; conversely, if he is wrong, he loses his entire initial bet when the binary option expires.

Online trading is a very risky investment

Risk of losing all the money

The first important risk is the loss of money within a few minutes, for example, when using binary options. It is very difficult to predict the evolution in the very short term (a few minutes, a few hours, a few days, etc.) in the price of a currency, stock market index, or commodity. It's like gambling.

In addition, with the instruments offered, especially CFDs, losses can exceed the amount originally invested: the "leverage effect" can indeed increase your losses, sometimes up to 400 times.

Risk of Fraud

Many websites offer Forex or binary options trading without any authorization. Very often it is a scam: the money is embezzled, in which case the remedies are very limited due to the location of these illegal service providers, often abroad. A list of these unauthorized websites is published regularly on the AMF website.

Double Fraud Risk

Fake financial professionals, fake law firms, or even people supposedly authorized by the authorities are offering to reimburse you for losses incurred on sites that are not authorized to conduct binary forex or options trading. Again, this is a scam. Thus, a depositor who has already lost the amounts invested in online trading is at risk of losing even more money.

Persistent campaigning and dubious corporate practices

Unauthorized sites that hide scammers, as well as some Forex and binary options sites with permissions issued by undemanding foreign regulators, have questionable practices. Express training in trading, "tips" on investing, copy trading (accompanying the investments of the so-called experienced trader), etc. : This type of method, designed to provide a profit, actually only increases the risk of losses. Trading requires many years of experience, and even a professional trader is far from immune from losses.

To this is often added persistent campaigning, reaching several calls a day, from the moment you left your contact details. It is accompanied by sophisticated manipulative sales tactics that encourage you to invest more and more: first, the agitator will give an attractive, friendly speech, suggesting that you become one of his "preferred" clients. Then, once you've taken a loss or want to withdraw your bet, he'll make a more threatening, guilt-filled speech to encourage you to invest again.

In the spotlight: the role of the AMF

AMF investigates, monitors providers with online trading sites and blocks access to those who are not authorized. It publishes and regularly updates a (non-exhaustive) list of websites that are not allowed to offer forex and binary options transactions in France.
From December 2016, the law prohibits financial professionals (banks, management companies, financial investment advisors) broadcast advertisements to individuals electronically about binary options, Forex and certain leveraged financial products (CFDs). Electronic media include websites, email, smartphones, radio, television, etc.
This prohibition also applies to all professionals (advertising agencies, etc.) who are involved in the dissemination of these advertisements . AMF enforces this law.

One piece of advice: avoid Forex and binary options

For individuals, given the risk associated with these tools and the presence of service providers that are not very serious or even operate illegally, the wisest decision would be to avoid speculating in Forex and binary options.

Keep in mind:

Does the marketplace guarantee you quick earnings? These are unrealistic promises.

The "training" offered for free online will never make you an expert trader.

The small profit made at the beginning is only meant to encourage you to invest more and more. After that, you will lose.


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