When you are a novice trader just embarking on a brand new journey into the exciting world of binary options, it is easy to get in over your head. You have high expectations, often unrealistic ones, and it does not help that you are bombarded with hard-sells and promotions for trading sites, systems, signal services and more. The language of these sales pitches is often unrealistic as well, and can contribute to the misconceptions that plague binary options newbies. If you are a novice, odds are you suffer from one or more of these misconceptions yourself. Check out this list and see if any of this sounds familiar.

1. Binary options trading is easy.
2. No prior knowledge is needed.
3. Bonuses are free.
4. You can find the perfect system and win 100% of the time.
5. You can make a million dollars overnight.
6. You can win on instinct.
7. You can get started with $100.
8. It is illegal to trade binary options in the USA.
9. You need to buy expensive systems, alerts, etc. to make it.
10. Binary options trading is just gambling.

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1. Binary options trading is easy.

A lot of novices are attracted to trading because they watch a video on YouTube that promises them easy money. But is there really such a thing as easy money? These videos show them how they just need to click “up” or “down,” and the money will follow. It is true that clicking “up” or “down” is all you have to do on your platform to profit, but these videos mislead new traders by making them think there is no process leading up to that. In reality, most of trading takes place on your charts, in your head, and on paper, before you ever click your mouse on your trading platform. Planning your trades is never easy. You do have to work hard to make money trading.

2. No prior knowledge is needed.

You can get started as a binary options trader without prior knowledge, but only as a learner, not a trader. You do not need a degree in finance or economics to start learning, and most newbies find the information fairly accessible, even though it can get technical when you start getting into trading systems. But you do need to be prepared to educate yourself on trading strategies, financial reports, and market moving events. And frankly, even if you had a degree in a related field, odds are you would find yourself with a lot to learn. You cannot start profitably trading without prior knowledge. And that is why you will be doing a ton of research and development before you ever deposit money into a trading account.

3. Bonuses are free.

It is hard not to think that bonuses are free, what with so many binary options brokers proclaiming that they are. How many times have you seen an ad that says that you can deposit $500 and get $500 free? “Free” in this context is not exactly free. It is, “Free, but with strings attached.” The strings in this case take the form of rollover. You usually need to trade 30 to 40 times the amount of the bonus plus your deposit in order to claim the bonus as cash. You can trade with the money, you just cannot withdraw it. So is it free money? Potentially—but for a lot of traders, it is just bait on a hook. Many traders end up accepting bonuses they will never get to withdraw, because they will end up blowing their bankroll before they can. This should not happen to you if you do all that research and development that I just talked about above.

*Don’t be discouraged by the word “free”. There are legit brokers with legit free offers.

4. You can find the perfect system and win 100% of the time.

You will find hundreds of trading systems for sale for binary options as well as related types of trading like Forex. You will find thousands of free systems too. Should you spend money purchasing a system? Maybe, maybe not, but never with the unrealistic expectation that any system is perfect. Many traders lose years of their lives to the pursuit for the elusive perfect system that will give them winning trades 100% of the time. It simply does not exist and never will. The closest thing you will find to a perfect system is to work on perfecting yourself and trading according to your strengths.

5. You can make a million dollars overnight.

What a wonderful thought. You could deposit $100 in your trading account today, and wake up a week later with $1,000. Give it a few months and you could have $10,000. Give it a year and you could have $100,000. You will be a millionaire in no time, right? And then you can do whatever you want for the rest of your life without being chained to a desk.

It is every novice trader’s dream, and the marketers who sell trading systems and alerts and the affiliates who drive sign-ups for trading sites know this. They exploit that dream by telling novices that they can actually achieve it, even though it is unrealistic. They display graphs of exponential gains and charts showing skyrocketing account balances. While those profits are possible and the theory of exponential gains is sound (and very important for a trader), life is more complicated and unpredictable than that, and there are a lot of other factors that come into play. It is important for novice traders to know that they are not going to make a million dollars overnight, even with a great system on their side—and certainly not by paying someone else to do the hard work for them.

6. You can win on instinct.

Some people gravitate to trading not because of the money, but because of their egos. They love the idea that they can win through their own sheer genius. They imagine that they have their fingers on the pulse of the market, and that they can measure market sentiment simply by a change in their own feelings. They trade on instinct, and believe that they will come out on top. They look forward to boasting later to their friends about how they just knew that it was time to sell GBPJPY or buy gold.

While it is an appealing fantasy, none of us have the ability to simply “know” that the market is going to do one thing or another. There is nothing that marks any one of us out as specially intuitive, though intuition does play a role in trading. But intuition must be paired with strategy, and strategy must be based on solid testing and results. That intuition is not something you come into trading with either; it is developed over time through extensive experience.

7. You can get started with $100.

Well … you can and you can’t. If you are so inclined, you can certainly open an account with $100. You may even find brokers that let you start with less. But you cannot realistically expect to make a lot of money doing this. There are a couple of problems you may not have foreseen. The first is your money management plan. You can only invest about 3% of your account on each trade if you want to trade responsibly and intelligently. Three percent of $100 is … $3. The effort you will be putting in simply is not worth it at that little pay. The other problem is that even if you wanted to, most brokers will not let you trade that little. A $5 minimum is common for 60 Second trades, and a $10 or $25 minimum is common for most other types of trades.

Find a broker that allows trading with a minimum deposit here.

So realistically, you really should get started with $500 or more. This can be discouraging to a newcomer. But you can continue demo testing while you work on building up your trading account. You will then be even more ready to trade when your moment comes.

8. It is illegal to trade binary options in the USA.

Since a lot of regulated brokers refuse to offer binary options trading to USA traders, there is a common misconception among newbies in America that they cannot trade at all. A lot of brokers do offer their services to USA traders, however. Those that do not are simply uninterested in dealing with the complexities of regulation.

Here is what the CFTC has to say on the matter:

“It is against the law to solicit U.S. persons to buy and sell commodity options, even if they are called ‘prediction’ contracts, unless they are listed for trading and traded on a CFTC-registered exchange or unless legally exempt.”

So you can trade legally in the USA if your broker is located in the USA or registered with the CFTC or denies you commodity contracts. So stop worrying about it, and start trading.

9. You need to buy expensive systems, alerts, etc. to make it.

With so many companies and individuals advertising their services, it is easy to feel like purchasing them is mandatory. If you could make it without spending hundreds of dollars on coaching programs, trading systems, signal alerts, and so on, why would so many people be selling this stuff? The reality is, people sell these products because they offer value, plain and simple. They can be helpful to you on your journey. But if you are trading on a shoestring budget and you do not have the money to invest in these products, you should not be concerned about it or feel like you are under pressure to do so. You can trade profitably without them.

If you do not buy systems and alerts, you simply need to come up with a system of your own to use. And you do not have to do it from scratch, not when there are thousands of trading systems available for free for you to use. There are even free signals that you can sign up for. As for coaching programs, they can be very helpful for some traders, but others get by fine without them. There is a whole community willing to help you learn and succeed, and you do not have to pay a dime to belong to it.

10. Binary options trading is just gambling.

This is a myth which is perpetuated by people who have lost money trading and by those who have watched friends and family members fail. It is devastating to blow a trading account, and it can be heartbreaking to watch someone else do it. When people have bad experiences like these, they walk away and tell everyone else they know that trading is gambling and that it is a surefire way to lose money.

While these cautionary tales should give you pause, it would be tragic to let them deter you from trading. These stories do point toward mistakes that you should avoid making yourself, but the mistake is not trading altogether. If you inquire more deeply, you will often be able to identify the real cause of failure. Perhaps a trader was investing without a system. Or maybe he was not managing money properly. Or perhaps she poured her entire life into trading and started neglecting herself and her family. There are numerous reasons why traders fail. Many traders do gamble blindly on binary options, but there is no reason you have to.

Hopefully by now you as a novice trader have a better understanding of the myths that circulate in the binary options world, especially those which seem to be targeted at novices. While a lot of these misconceptions are spread without any intent or malice, many of them are perpetuated on purpose by advertisers with a vested interest in your decisions. Once you can sort out fact from fiction, though, you can re-evaluate where you stand and get a more realistic feel for what you can achieve as a binary options trader. At that point you will be ready to set forth on the next stage of your journey.