You stare at him for 9 seconds and then ask, “Are you stupid? The first broker was giving me 1000 dollars profit for my 1000 dollars investment. And you are asking me to invest 1000 dollars so you can give me 900 profit back?”

“Oh, no! You are mistaken, sir.”, he says politely. “I will give you a 900-dollar profit only sometimes. Most of the time, I will give you 700 dollars back.”

You scratch your head and say, “Are you crazy? That doesn’t make any sense! Why would you give me less profit when the first broker is giving me more for the same investment?”

If you thought the second broker didn’t make any sense, then you are right! But what if I told you tens of millions of people happily choose the second broker? Crazy, right? Unfortunately, that’s Binary Options Trading in a nutshell. It’s so crazy that the Securities and Exchange Commission of the United States and many other agencies around the world responsible for regulating the markets and protecting investors have asked people to stop trading binary options multiple times.

Why?

What if I said that Binary Options Trading doesn’t really work? Will you stop trading it? Let’s see if I can make you quit Binary Options by the end of this video. How am I going to do this? By showing you actual data that says it most likely doesn’t work and by sharing my own experience with it.

That’s right. Unfortunately, many years ago, when I was new to trading, I was looking for brokers who provided good demo trading accounts for free. By free account, I mean they let me practice trading without requiring me to sell my detailed personal information or deposit any amount. Thanks to the data big advertising companies have on us, I was bombarded with Binary Options ads basically everywhere. They sucked me right into their platform, and I wasn’t mad about it either. Most Binary Options platforms have some of the best user interfaces that don’t look like this. Plus, they let me practice with just an email and password. Beginner me loved it! However, things started to go wrong from this point.

Originally, I only signed up for the Binary Options platform to practice normal forex or currency trading. But they drew me into a bit of Binary Options as well. In normal trading, you have a chart like Euro USD, for example. If you think the price will go up in the future, first, you take a long trade by placing a buy order. Then, you set the stop loss and profit targets. If the price reaches your stop loss, you book your predetermined loss. If it hits your profit target, you book a profit. How much profit and loss you will make is decided by you by adjusting your targets and position size.

But Binary Options doesn’t work like that. It’s much scarier. If you want to place a long trade in Binary Options, you first have to decide how much you want to bet in that direction. For example, if the price is at 100 and you bet 1000 dollars on buy, if the price stays above this 100 price level even by a small amount, you win up to around 900 dollars. But if the price stays below your entry level even by a little bit, you lose your entire 1000 dollars bet. Do you see something wrong with this yet? If you don’t, don’t worry. Beginner-me didn’t get it the first time, either.

Actually, I only realized how stupid binary options were when I luckily saw a trading guru on the news channel recommending banning it. Everything I’m going to show you next is a mixture of what he said and what I found out afterward that made me quit Binary Options trading.

Remember the long trade example I just gave? Well, I left one important thing out of the explanation: the time limit. When you take a trade, your trades are automatically closed or completed when this time limit is reached. In a long trade, if the price is above the entry point only at the end of the time limit, then and only then will you win. If the price goes up and you are right but then comes down below the entry point, you lose your entire bet. But that’s not even the crazy part. Want to know what the time limit usually was when I was trading it? Between 30 seconds and 30 minutes.

Have you noticed the problem yet? Let’s do some quick math. In normal trading, if you randomly take a long trade and set the profit and stop loss at the same distance, your chances of winning are fifty-fifty. If we open the official trading rush app and go to the probability section, we can see that we won’t lose money with a 50% win rate. This is, of course, assuming there are no broker charges like in many Binary Options platforms. On the other hand, if we take random trades in Binary Options, we still have a fifty-fifty chance of winning, but here, you’re not winning the same amount. Binary options brokers, at least when I tried them, only gave around 70-90% profit back. Furthermore, the 90% profit rarely appeared consistently. Maybe it was mainly there for advertising purposes.

But still, let’s say they consistently gave a 90% profit. If we put that number in the probability section of the trading rush app, we can see the sad reality of Binary Options. Where normal trading was not losing money, Binary Options is consistently losing money.

Now I know what some of you are probably thinking. This test was with a 50% win rate. If we use a high win rate strategy, Binary Options should work, right? Why don’t we find out? Let’s go to the official trading rush website, then TR Score, to see the data of previously tested strategies in the normal market. Let’s look at the highest win rate strategy. It was a M-A-C-D crossover with 200 EMA in a trending market. I went to the same market structure where this strategy got around a 60% win rate with a 1.5 to 1 reward-risk ratio and then applied the Binary Options rules. I took the entry at pretty much the exact same place where it got around a 60% win rate. But then I closed the trade after 1 candle, 5th candle, 10th candle, 15th candle, and 30th candle. This is to simulate different time limits of Binary Options from 1 minute to 30 minutes.

That’s 500 trades in total I took. When I ran the experiment, the 1 candle time limit got approximately a 60% win rate. The 5th candle time limit got a 59% win rate. The 10th candle time limit got a 51% win rate. The 15th candle time limit got a 56% win rate. The 30th candle or 30-minute time limit got a 60% win rate.

These high win rates are making Binary Options look good, but hold on. If we do some math and look at the data, we can see that the break-even win rate of profit with Binary Options is not 50%. It ranges between around 52% and 59% if the profit also ranges from around 90% to 70% respectively.

Do you see the problem yet? Even though Binary Options got a good win rate even with time limits, because of these high breakeven profit win rates, two of them lost money if the profit received after winning was lower, like 70% of the risk. If the broker is generous and consistently gives you a 90% profit back, then only one time-limit lost money in this test. That doesn’t sound that bad, right? Think again. Your Binary Options broker is smarter than this.

Anyone who has been trading even for a little while most likely knows that markets don’t stay good continuously. When the markets get bad, even your high win rate strategy will give around a break-even win rate. Let’s see what happens to normal trading and binary options trading when the market switches from good to bad.

In the beginning, binary options and normal trading both made money when the market was good. Even in this good scenario, normal trading makes more money because the profit is 150% of the risk. That’s around 2 times more than the 70% to 90% profit Binary Options gives back. When the markets get bad, it takes time for the trader to notice it and adjust. During this time, the win rate of both will drop to around break-even. In normal trading with a 1.5 to 1 reward-risk ratio, the break-even win rate is 40%. For Binary Options, the breakeven win rate of the strategy is 50%.

In Binary Options, the break-even win rate of the entry strategy and the break-even win rate of the profit are different things. Since the strategy break-even win rate is much lower than the profit break-even win rate, Binary Options strategies start losing money in the bad market. On the other hand, since the strategy and profit have the same break-even win rate in normal trading, you never lose money in the long run with normal trading.

If you’re thinking that you will avoid the bad market in Binary Options, resulting in profits only, what are you going to do in the slow and average markets? The high win rates you saw Normal and Binary Options achieve were in a good favorable market. When the markets get less favorable, the win rate can easily drop to just above break-even. In normal trading, just above the break-even win rate still makes money in the long run. But in binary options, just above the break-even win rate is not enough to break even.

It even sounds stupid when I say it out loud. Just above a break-even win rate is not enough to break even. And guess what? Good favorable markets don’t appear that frequently. Most of the time, you will trade in bad and average markets. Strategies that consistently give a very high win rate in every single market condition most likely don’t exist.

But then someone might ask, I tested Binary Options with a strategy that got a high win rate in the normal markets. What happens if I test a strategy that is specifically designed for binary options? Okay! Let’s do that! I found a bunch of videos claiming binary options strategies that give a 100% win rate and up to 20,000 dollars a day. We will ignore the fact that many of them are making money by selling you affiliate links to these binary options platforms.

The 100% win rate strategy shared in one of the videos I found is the basic parabolic SAR indicator strategy. You enter a long trade when the parabolic SAR indicator switches below the price for the first time. And you take a short trade when the indicator dot switches above the price. Guess what? I have already tested this in the normal market. And it only got a just above break-even win rate. It was not 100%, but it was at least profitable. But let’s see what happens if I test it in binary options style in the same market structure.

With 1 candle or 1 minute style time limit, the win rate was approximately 49%.

With the 5th candle time limit, the win rate was approximately 46%.

With the 10th candle, it was around 54%.

With the 15th candle time limit, it was around 54%.

With the 30th candle or 30 minute time limit, the win rate was approximately 54%.

Even though the Binary Options videos claimed a 100% win rate, it was below the break-even point of the profit most of the time. If the binary options broker was giving 70% profit back, all time limits lost money because the “profit-break-even” for 70% profit is almost 59%, higher than all of these win rates. With 90% profit, 3 of them were only around 1 percent higher than the break-even profit.

If we keep taking more trades, all these win rates will most likely drop to the entry strategy’s break-even point of 50%. When that happens, all of them will lose money.

I ran another test, but this time, I selected one of the worst trading strategies I have ever tested in the normal markets. The M-A-C-D Zero Lag indicator strategy. It’s one of the few strategies that actually lost a decent amount of money in my testing series.

If this worst strategy gives around 50 to 55% win rate in binary options, we can say that the short time limit is resulting in many strategies having around a gambling 50% win rate.

With 1 candle or 1 min time limit, the win rate was 42%.

With the 5th candle time limit, the win rate was 50%.

With the 10th candle time limit, the win rate was 51%.

With the 15th candle time limit, it got a 48%.

With the 30th candle or 30-minute time limit, it got a 55% win rate.

This time, with one of the worst trading strategies, the win rates are slightly on the lower side when compared to previous data. I would say that even in binary options, good strategies stay slightly above their break-even win rate, and bad strategies stay slightly bad. But most good strategies still find it difficult to stay above the break-even win rate of the profit.  

If you are finding it difficult to keep up with all these different break-even win rates and other terms, it’s normal. I’ve been writing this video for the last 2 days, and my brain is completely fried right now.

The funny thing is, the “Binary Options and Fraud” post, the United States Securities and Exchange Commission made, mentioned binary options, giving only around 50% profit back many times. When I tried it many years ago, I don’t think I ever saw 50% profit. But if these brokers were really giving a 50% return at some point, the win rate required to just hit break-even profit would have been almost 67%. That’s so crazy. If I say my neighbor’s dog runs a hedge fund, it sounds more likely to happen than winning in binary options. With a 67% break-even win rate of profit, no strategy I have ever heard of is going to make money in binary options.

I’m not going to go into the ‘some binary options brokers not letting customers withdraw their profits’ side because I personally haven’t experienced anything like that. But there are complaints like that mentioned on the Securities and Exchange Commission site. There is even a complaint that says some of these brokers manipulate software to create losing trades. We will keep this video limited to my personal experience and the data I found.

The thing that annoyed me was that many of these binary options brokers were working in a sort of grey area; at least, that’s what the news trading guru I saw said. Basically, when I tried them many years ago, Binary Options were still a relatively new thing. There were no strict laws or rules on advertising platforms either.

Even though many binary options platforms were little bit restricted, their affiliate partners, who were basically normal people trying to make quick bucks without paying attention to the regulations, spammed binary ads on many popular social media platforms. That’s how many people, including me, found out about them. Thanks to the voices of that news trading guru I saw, and many other people, Binary Options is now banned or heavily restricted. However, advertisements still exist on some social media sites. In theory, Binary Options work if you have a very high win rate strategy. But in reality, those kinds of strategies are basically non-existent.

But do you see the problem yet? I stopped trading Binary Options after realizing all this. It’s better not to blindly use these high-risk financial instruments. Trading normal things will most likely have a much higher probability of making money in the long run.

Switching back to normal trading grew my account better. But remember, everything I said was based on my own experience, the things that the news trading guru said, and the data I gathered. Everyone’s trading journey will be unique. Now, watch this video next to learn more about some of my earliest trading strategies.