This is a guest contribution by Dmitry Ivanov of Binary and Forex . If you would like to submit a contribution please contact Bill Beatty for submission details. Thank you.
Much has happened in recent years when it comes to the promotion and implementation of responsible gaming policies in online gambling. Operators have realized that offering responsible gambling tools to players is beneficial for a sustainable business model, while regulators have come to notice that it is important for their reputation and credibility.
While all of us were busy building and promoting tools for self-exclusion from sportsbooks and deposit limiting features for casinos, however, a whole industry has grown up and matured in our shadow, and it is one that likes to hide behind the label of financial respectability while being ten times worse than any gambling company when it comes to business practices. I am of course speaking about Binary and Forex trading companies and the products they are offering to the public.
Even Apple has had enough: the tech giant has just banned all Binary trading apps from its App Store, dealing a massive blow to this often shady but very lucrative category of apps. That should tell you everything you need to know about this industry. For a whole type of app to be kicked out by Apple is a clear sign that a considerable number of people have complained, otherwise the tech giant from Cupertino would never act like this.
Apple isn’t the only one angry with the companies providing binary and forex trading apps, though. The few outfits who bother to get a license for their activities usually do so by opening a shell company in Cyprus and getting a Cysec investment license, which can then be passported across Europe. Cysec is headed up by Demetra Kalogerou and she was recently reported to have given a selection of locally licensed companies the hairdryer treatment during a personal meeting with representatives at her office. This telling off was based on an ever-increasing number of complaints being filed with the regulator due to these companies essentially being nothing more than very dangerous and irresponsible gambling operators.
Around 70% of casual traders lose all their money, and they do so quite quickly. While an online bookmaker might be happy to keep a player active for three months, Forex outfits are often happy to reach three weeks. Most of the profit is not generated from many small players, though, but from a very tiny number of VIPs. In the case of one well known Russian outfit that is currently trying to expand into new markets (with limited success), 0,2% of customers are creating over 80% of all operating profits. These sort of figures, which are very similar to profit distributions seen in mobile games, are of course hardly sustainable and the management there knows that but appears to be unable or unwilling to do anything about it. On paper the profit margins are amazing, but they are based on burning through the customer base at a rapid pace, leaving many users left to wander through their own financial wasteland after the failed trading adventure is over.
What is the difference between a Binary app like IQoptions and a Forex Trading application like the Russian owned Libertex or London based Bux you may ask? While the companies behind them (especially those behind the Forex ones) will be quick to tell you that they are not the same, in many respects they are. Especially the products aimed at casual traders (those people new to financial trading or not willing to get their head around complex programs such as MetaTrader) are designed to give the impression that financial trading is an easy and a fun activity suitable for everyone.
The truth is of course a little different. Despite how easy this new generation of financial trading apps make it look, the risks remain the same and are very difficult to evaluate for users. When someone bets €50 on Man Utd to win the game, it’s easy for him to understand what he is betting on and what factors may influence his chances of success, such as team or injury news for example. When using a financial trading app, it is much harder for a normal user to understand what he is betting on when buying EUR/USD for example, and what factors could impact that bet in positive or negative ways.
And of course, if you use a company that allows proper margin calls, then you might lose a whole lot more than just the amount you invested or even your account balance. Stories about inexperienced traders literally losing their house after a deal went south are not uncommon.
In summary, binary and forex trading apps are currently seeing a rise in popularity as companies are trying to bring this risky activity – that was previously reserved for professional financial traders – to the inexperienced mainstream. The results of this will be quite predictable, with complaints to regulators certain to increase and the whole binary and forex industry running the risk of being regulated out of existence. As far as dangerous apps aimed at inexperienced mainstream users are concerned, that probably wouldn’t be a bad thing. The advice for any gambling operator toying with the idea of adding this type of product should be quite clear: if you value your license and your reputation, then don’t even think about it.
About the author:
Dmitry is a former affiliate marketer of Binary and Forex.