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I watched many videos and read many tutorials about binary trading.

If I really understood it, you bet that a quote/currency/stock market/anything will rise or fall within a period of time.

So, what is the relationship with trading? I see no trading at all since I don't buy or sell quotes. All you can do is betting (Exciting Markets = winning bet)!

Then, since anyone should have the same technique (call when a currency rises and put when it falls), how can the brokers (websites) make money? I'm really afraid to bet because I think that they can go bankrupt at any time! Are my fears correct?

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    Do you feel that you have to bet even though you are "really afraid to bet because I think that they can bankrupt you"?? If so and you do not have any desire to curb this fixation, there is nothing that anyone can say or do to help you. But if you do desire help, then the first thing you should do is destroy all the videos about binary trading that you have watched and delete all those bookmarks and YouTube links from your browser. – Dilip Sarwate Aug 13 '12 at 1:49
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    Don't do it. It seems from your comments, you don't know how CFDs work and how brokers make money. Stay away from it and you will be happy you didn't go forward. Only play if you know the rules. – DumbCoder Aug 13 '12 at 7:46
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    One should not invest/bet on things they either don't understand or are not comfortable with the risk involved. Investors can do well their entire lifetime, yet never buy any derivative. – JTP - Apologise to Monica Aug 13 '12 at 21:45
  • I interviewed at a spred betting place last year that also did binary options - the guy interviewing me said its basically gambling – Pepone Feb 18 '16 at 21:47
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"you bet that a quote/currency/stock market/anything will rise or fall within a period of time. ... So, what is the relationship with trading ? I see no trading at all since I don't buy or sell quotes."

So, if you just wander in and say "oh, hey, look, a bunch of options, i'm going to play games and have excitement" then that is, in fact, some sort of gambling. Indeed, most trading activities will be like that to you.

On the other hand, you might be engaged in other business where those things matter. You might be doing a lot of trading elsewhere in the market, for instance, and suddenly everyone freaks out and the stock market goes crazy and you lose a ton of money. To protect yourself from losing a ton of money, you might buy a binary option based on VIX (the volatility index) going over a certain level.

If you're not in a business where you're buying it to protect yourself, then you should probably only buy the options if you have reason to think it'll be profitable and worth the risk. If you don't understand the risks, skip it.

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If I really understood it, you bet that a quote/currency/stock market/anything will rise or fall within a period of time. So, what is the relationship with trading ? I see no trading at all since I don't buy or sell quotes.

You are not betting as in "betting on the outcome of an horse race" where the money of the participants is redistributed to the winners of the bet. You are betting on the price movement of a security. To do that you have to buy/sell the option that will give you the profit or the loss. In your case, you would be buying or selling an option, which is a financial contract. That's trading.

Then, since anyone should have the same technic (call when a currency rises and put when it falls)[...]

How can you know what will be the future rate of exchange of currencies? It's not because the price went up for the last minutes/hours/days/months/years that it will continue like that. Because of that everyone won't have the same strategy. Also, not everyone is using currencies to speculate, there are firms with real needs that affect the market too, like importers and exporters, they will use financial products to protect themselves from Forex rates, not to make profits from them.

[...] how the brokers (websites) can make money ?

The broker (or bank) will either:

  • Act like an intermediary and buy the contract from another willing seller and resell it to you by taking a little margin
  • Create a contract to give you the gain/loss specified in the contract. Then they can hedge it (fully, partially or not at all) by trying to do the opposite of the contract with a combination of several financial products. When it come to taking risk (ie, without a full hedge), it's more likely to be a bank or an hedge fund not a broker.

I'm really afraid to bet because I think that they can bankrupt at any time! Are my fears correct ?

There is always a probability that a company can go bankrupt. But that's can be very low probability. Brokers are usually not taking risks and are just being intermediaries in financial transactions (but sometime their computer systems have troubles.....), thanks to that, they are not likely to go bankrupt you after you buy your option. Also, they are regulated to insure that they are solid.

Last thing, if you fear losing money, don't trade. If you do trade, only play with money you can afford to lose as you are likely to lose some (maybe all) money in the process.

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As far as I have read, yes binary option is a part of trading. I saw tutorials on many sites like investopedia.com , verifyproducts.com etc. which clearly shows that in binary options, trader has to take a yes or no position on the price of any underlying asset and the resulting payoff will be either all or nothing. Due to such characteristic, it has become the easier way for beginners to enter in financial trading market.

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    Options trading is not something you should advise for beginner investors. – Grade 'Eh' Bacon Oct 28 '16 at 17:16

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