It has been speculated that there is a link between binary options and gambling due to the similarities in their executions. With gambling, you should be making a calculated guess so that you attain a particular result. What you want at the end of the gamble is for your guess to be correct so that you ‘win your bet’ and receive a pay-out. The same principle applies in binary options trading, where you make a calculated guess about the movement of an asset in the future. If you are correct about this movement then you will benefit but if you make the wrong call, then you will lose your investment.
Despite these similarities, binary options trading and gambling are not the same thing. Here are the main differences: –
- The odds when trading in binary options are not fixed. They are very much dependant on what is happening within the market on a daily basis, and it is from this information that you choose how high or how low your binary options trade is going to go. With gambling, you are dealing with fixed odds as you are limited to making a choice based on cards or numbers for example.
- When you choose binary options trading, you are always aware of what the odds are, and therefore, you can say that you can play these odds so that they are consistently in your favour. This makes it easier for you to forecast a possible win. However, when you gambling, the odds are consistently against you as the intention is to do what is necessary so that you do not get a pay-out.
- The types of assets when trading binary options and gambling are quite different. With binary options, your assets include commodities, indices, stocks and forex. All these are active within financial markets around the globe. With gambling, you are dealing with casinos and sports betting, which do not have any real standing in financial markets.
- With both binary options trading and gambling (particularly sports betting) it is possible to be in the money or out of the money. This is because for both, before you choose to trade, you gather information that will increase the possibility of making a successful trade. You are able to do this legally which is not the case with other types of gambling.
- The level of skill that you have will affect the way that you trade binary options or the way that you gamble. With binary options however, traders of different levels of skills are given access to the same opportunities, and they can trade on the same platforms. The difference is that they have the freedom to decide how much they are willing to deposit into their accounts and the amount that they are willing to put into each trade. With gambling, this is not the case. Where poker players are looking to make wagers, they will be divided into different groups based on their level of skill and it will only be possible to interact with others who have the same skill levels. Furthermore, there may be a cap placed on how much can be wagered, and the gap between the minimum and the maximum amount is much narrower when you are gambling, than when you are trading binary options.
- When planning your strategy for binary options trading, you can refer to historical data and charts to identify patters that will help you make better investment decisions moving forward. With gambling, it is close to impossible to do the same, as gambling involves some strategy, though for the most part, it is based on luck.
Binary options traders are protected on leading trading sites because these sites are regulated. There are some gambling sites that are regulated to ensure that high-quality standards are maintained, though this regulation does not offer the same support that is given to binary options traders.
Another key difference between binary options trading and gambling is the way that they are recognised by governments. When you benefit from binary options trading, you are considered to have secured earnings which are taxable. However, when you gamble and make a return, this is considered to be winnings, and many times is not taxed.