If you are wondering where binary option trading sits on the spectrum from investing to gambling please see Binary options: investing or gambling.
The 2 big differences between binary options and most other investments are
- Binary options are very short term in length, ranging from 30 seconds to 1 month.
- Other investments have the possibility of winning or losing any amount within a wide range. Binary options have only 2 possible results, you will either win the maximum possible profit or lose the maximum possible loss.
That sounds a lot like betting, so let’s look at how binary options are different to other types of wagering.
Different types of gambling can be separated into games of chance on the one hand and games of mixed chance and skill on the other. Binary option trading definitely falls in the latter category.
There is more skill and research involved in being a successful binary options trader than there is in games of chance such as roulette and slots. The amount of mathematics, thought and strategy puts it closer to professional poker or sports betting.
Compared to poker
The big difference between binary option trading and poker is that poker has a much larger human interaction and physiological element.
Compared to sports betting
The big difference between binary option trading and sports betting is that in sports betting when the likelihood of an event occurring changes the payout % (odds) changes as well. In sports betting if a lot more customers are wagering on selection A, the payout % on selection A will go down. Whereas in binary options trading it remains the same, and that is where the value lies.
The week before writing this US unemployment figures were released and they were much worse than expected. This almost guaranteed that the EUR/USD would rise sharply and it did. Yet we were able to wager on that at one broker with the standard 180% payout! In spots like that binary options are far superior to other types of wagering.