Last Updated on Apr 8, 2020 by James W

There are many myths about binary options that cause many to buy them without understanding them and losing a fortune while others stay away out of fear. However, the world of binary options is full of possibilities and you shouldn’t let hearsay preventing you from taking advantage of it. Here are eight common myths about binary options and the facts about binary options.

Binary Options Trading Is Illegal

First, binary options trading is not illegal in the United States. If you’re not located in the United States, then it may be illegal for you, just as a credit card that charges interest is illegal in many Muslim countries. Second, legal issues only arise if you try to trade binary options on international trading platforms or fail to pay taxes on your capital gains. The only requirements for binary options contracts for Americans is that both the trader and the broker must be located in the United States, or the broker should be registered with the CFTC.

Success in Binary Options Trading Is Easy

This is the mindset that leads to horrific losses and people comparing binary options trading to gambling. This is also the mindset along with the ads that promote binary options as similar to online gambling that causes so many to burn out. Just enter some numbers, hit a button, and wait a few minutes or hours to win your money! Actually, it takes time to learn about the investments and investment strategies in binary options to succeed. If it were easy to accomplish this, you wouldn’t see nine in ten traders – the ones who think it is easy and makes you wealthy overnight – dropping out.

A safe solution is trading in a demo account so that you can see if you have the strategy down and know when to stop when emotions seem to be running too high.

Read more
Top 5 Day Trading Blogs Online: How to Learn from The Masters

Binary Options Are Gambling

Binary options are options on the price of various investments just like stock options are an option to buy stock at a certain price. Both are backed by an investment, whether commodities, gold, cryptocurrencies, physical currency, stocks or something else. Buying binary options is not gambling unless you’re making a guess, and this indicates you don’t know what you’re doing. Binary options trading is not gambling if you know what you’re doing and you don’t let the excitement take over so that you make trades regardless of the trends and math behind the deal.

It becomes gambling when you watch something trend up and keep going, longer or bigger, until you lose. The mistake in this case is letting emotions instead of logic and a plan per a binary trading system decide for you.

You Can Get Rich Overnight

There is no legitimate get rich quick scheme unless you’re a thief, trading on inside information or a Congressman. If you don’t know what you’re doing, you are going to be part of the 90% plus who wash out of binary options trading after suffering repeated and financially draining losses.

It takes time to learn about the commodities, currencies and investments behind the binary options, as well as understand the trends and expected price ranges for these investments. Learn about the investment and strategies you can use to invest in options. Try out your strategies with small trades you can afford to lose. This takes time. Only work up to the big trades when you have a successful track record of earning much more than you pay in fees and lose when you’re wrong.

Read more
How to become rich through Forex trading?

A similar myth is the one that says you cannot trade with a small account. This results in people thinking you have to go big to get into binary options trading at all.

Bonuses from Binary Trading Options Platforms are Free Money

First, the bonuses are not free money. They cannot afford to give you free money. There is a price you pay for that “bonus”, and it comes in being committed to the platform for a specific period of time. In some cases, they require a certain number of trades or other acts that generate commissions for them. In this way, the bonus is paid back in full or more by the trades you make while you’re stuck on the site.

My Advisor Will Make Me Rich Trading for Me

It is not a good idea to just hand over the “keys” to your account to a trader you barely know. If you do this with your 401K or IRA, the money may be lost in high potential upside and high risk schemes, potentially wiping you out. The adviser may not care because they only talk about the person whose money they doubled to future prospects, not the half whose money they lost. And, they are certain to make trades that guarantee they get paid, too. With binary options trading, the same risk exists and is far higher when someone associated with the binary options trading platform is working. They will make the trades that maximize their profits, their commissions, with your potential and overall returns being a secondary concern if at all.

In short, don’t let someone from the binary options trading platform take over your account. Learn successful strategies yourself by reading about them from successful traders and resources like the Stern Options blog. Then, start small so that you can prove you understand the strategy. The side benefit of this is the fact that you’ll know how to earn money yourself instead of paying even more fees for a faux pro to trade in your account while seeing the returns the scam artists promise.

Read more
Familiarize yourself to the necessary trading skills 

You Can Trade in Binary Options Themselves

There is no central exchange for binary options like the New York Stock Exchange exists for the stocks of American based companies. There are multiple binary options trading platforms, and they don’t have to offer the same products and they don’t charge the same rates.

I Shouldn’t Sign Up, It’s Identity Theft

If you are opening a bank account, they want your Social Security Number for tax reporting purposes. When you open a retirement or trading account, the financial institution needs your information for their reporting purposes even if you don’t make any money. A binary options trading platform should ask for your identification and verify it. If they don’t, that is the warning sign you shouldn’t deposit money in the account.


Contrarily to what many people may think, binary options trading is completely legal in the United States. It isn’t easy to do, and anyone telling you it will make you rich overnight is a scammer. They aren’t gambling, but if you trade based on emotion or without knowledge, it might as well be. You cannot trade in binary options themselves like stocks, as you only buy options on tradable investments. Bonuses are not free money, and entering your identity and verifying it isn’t identity theft. Don’t hand over control of your account because the people asking for it don’t have your best interests at heart.


Founder and chief editor of Blogger, Affiliate Marketer, Tech and SEO geek. Started this blog in 2011 to help others learn how to work from home, make money online or anything related to business and finances. You can contact me at