Binary options have only two possible outcomes. You either earn profits or lose money. This aspect makes those contracts similar to betting or gambling, where you also have only two probable results. Many people think about fixed-time options as a pure game of chance because they have this feature, which is similar to casino games or sports betting. However, if you conduct deeper research, you will see that there is one key thing that makes binary options different. To start trading right now, create an account at Binolla.

Why Do People Think that Binary Options are about Gambling?

Apart from their binary nature, binary options may seem similar to gambling for some other reasons. For instance, a lot of people think that fixed-time contracts have a random outcome, and you can’t predict the results of each particular trade. Moreover, when you look at binary options from this point of view, you may even think that it is better to spend time playing some casino games like roulette or blackjack with an RTP (return-to-player) over 95%.

This argument is very strong, but it is mostly supported by those who have never traded before. In fact, fixed-time contracts are not of a random nature, and you can try to predict the outcome of each particular trade using various tools.

When you trade binary options, you can use various types of strategies that are based on drawing tools and technical indicators. Here are some simple examples of how you can predict the underlying assets’ price.

The example above shows how you can use various technical analysis tools to predict price fluctuations. In particular, we have applied a resistance line here to see when the price is likely to stop growing and we have bearish Engulfing here, which is a reversal signal predicting the price to change its direction of movement from bullish to bearish. Traders always buy Lower contracts in this situation.

Another example of using a trading strategy is demonstrated above. We have applied an RSI indicator with standard parameters. Once the line of the indicator leaves the oversold area (below 30), there is a signal that the price is likely to grow. As you can see on the chart, the currency pair moves upward later. Traders buy Higher contracts using this signal.

Both examples demonstrate that binary options are predictable. Even if you can’t rely on such strategies in all situations, you can adjust your trading so that you can have consistent profits over time.

Moreover, apart from using those strategies, you can also apply fundamental analysis and use various macroeconomic news. For instance, traders can buy contracts right after central banks make interest rate decisions. Depending on how interest rates change, the price may go upwards or downwards, allowing traders to earn money on those movements.

All in all, when you play blackjack or roulette, the outcomes rely on chance, while in binary options, the results are dependent on external factors. If you master several strategies, you can significantly improve your odds and, therefore, make profits.

Personal Traits of a Gambler and a Trader

The difference between binary options and online casino games lies even deeper. Gamblers spend time betting on some events in the game, like a sector or colors in roulette, or whether they are going to have a hand closer to 21 than the casino. Gambling is a kind of entertainment with the main goal of distracting yourself and winning money if you are lucky enough.

Trading is different. Whatever financial tool you choose (binary options, Forex CFD, stocks, or cryptocurrencies), this has nothing to do with entertainment. This is the everyday work that you do in order to reach your financial goals. The casino may make you rich if you are lucky enough. There are those gamblers who have huge jackpots in slots or win a lot of money in roulette, for instance. However, all those winnings are based solely on luck. They do not depend on your personal traits and skills.

When it comes to binary options trading, success here depends on your approach and methodology. However, what is even more important is that trading is about being focused and disciplined, as well as avoiding those emotions like greed, fears, etc. The table below reveals the key differences between trading fixed-time contracts and gambling.

Another important thing to consider is the risk. Both gambling and binary options trading are risky. However, what is important here is how you treat those risks. In gambling, you simply assume that you have risks and can’t do anything with them. 

As for binary options trading, along with accepting the risks, you can manage them. There are plenty of strategies and methods that allow you to decrease trading risks, if not minimize them.

	Binary Options	Gambling
Strategy	When trading binary options, you can use full-fledged technical analysis, which includes various drawing tools like support, resistance, trendline, channels, indicators like the moving average or Bollinger Bands, etc.	Professional gamblers use card calculation strategies to increase their chances of winning in poker or blackjack. Those strategies have nothing to do with trading tactics, as they are based on totally different principles
Money Management	Traders use various sophisticated money management strategies. They calculate eventual profits, allocate funds in each particular trade, and think about risks and how to minimize them	Money management in gambling is very simple. You can plan how much money to invest in each bet as well as use Martingale or other similar tactics
Diversification	Binary options are often used to diversify your trading portfolio. Professional traders and investors add Forex CFDs, stocks, cryptocurrencies and fixed-time contracts in order to increase their profits or minimize trading risks	There is no diversification in gambling at all. While you can choose to play different games, you can’t add them to your portfolio, and your gambling results are always separate
Factors that define the outcome	The success in binary options trading rely on external factors that you can try to predict. For instance, if a central bank hikes rates, you can expect the currency to go upwards.	All or most online casino games outcomes depend on luck. There are no external factors that will help you predict the results of each particular round

Trading to Win or Why Many Novice Traders Confuse Trading with Gambling

Trading to win is what many beginners do in the financial markets. The goal of such an approach is to win, which is logical, but traders of this type do not use any systematic approach to reach their goals (let’s call them “tradeblers” as those are traders but with a gambler’s mindset). While trading to win sounds evident (why trade if you don’t win? ), there is a big difference between this approach and trading with a system.

Trading to win is what drives people far away from making money in the financial markets. The psychology behind this approach is that you need to win at any cost without even paying much attention to what is going on the charts. Trading to win gambling approach leads to situations when you want to win back or simply buy a binary contract when you are on the winning streak without properly analyzing the asset.

Assume that a trader buys a Higher contract for EUR/USD at 1.0900 as a strike price. EUR/USD goes higher and hits 1.0905 at the moment of the contract expiry. Then you put your profit into your virtual pocket. What would a professional trader do in this case? They would analyze the market properly, and if they found something interesting to trade, they would buy another contract. If not, they will stay out of the market for a while until another trading opportunity appears.

What does a tradebler with a trading to win approach do? Buy another contract right away, even without having a glance at the charts, just because they had a previous winning trade and they assume that they are going to make another great market bargain.

The example above shows the difference between professional traders and tradeblers whose main idea of winning dominates over systematic trading.

Trading to win approach prevents you from diving into the real world of true trading. Before you even step on this ground, you should be prepared for losses that will occur from time to time, which is totally contrary to what you expect when trading to win.

Assume that a trader has closed ten positions with three losses and seven profits. They lose $100 in each unprofitable trade and make $85 in each profitable trade. Therefore, their total losses are $300, while their net profits from profitable trades are $595, which illustrates how true seasoned traders make money in fixed-time options by using a trading system approach. They know that losses are an integral part of trading, and they accept them, but the idea is to grow your profits so that they are higher than losses.

As you can see, in order to trade and not gamble, you should avoid this trading-to-win approach and set your mind to trading a system concept. 

Why Do Many People Choose Binary Options?

In general, binary options are very simple and straightforward financial instruments to understand. However, this is not the only reason why traders prefer this type of investment. There are some other great features that you can enjoy when trading fixed-time contracts:

• Limited risks. Binary options come with limited risks, as you don’t need leverage to buy those contracts and earn significant profits. You trade with your own money only and can easily calculate how much you can spend in each particular trade;
• Two outcomes only. Fixed-time contracts have two strict outcomes: you either earn money or lose it. This makes it a lot easier for traders to understand the nature of trading;
• Fixed payouts and risks. Unlike many other financial instruments where you have to conduct complex money and risk management calculations, binary options offer fixed payout and fixed risks per trade. You know in advance how much you can earn or lose and this is predetermined in each particular contract you buy;
• Fast action. Traders often choose binary options because they are quick. When trading stocks, for instance, you have to hold them for a long time to make substantial profits. If you trade binary options, you can buy contracts that expire in 5 seconds, which allows you to make even more money over a shorter period;
• A variety of assets. Binary options trading provides you with access to a huge range of assets. You can buy fixed-time contracts on currencies, stocks, commodities, metals, and even cryptocurrencies.

How to Increase Your Chances in Binary Options Trading

We have already mentioned one trait that makes binary options trading different. Unlike gambling, in trading, you can use various techniques and approaches to increase your chances of making consistent profits. Here is a list of tips and recommendations that you can use in your everyday trading routine that may help you succeed:

• Use a trading plan. Professional traders always have and use their trading plans. Whatever the market situation is currently developing, you should never try to gamble or place a trade randomly. A trading plan includes a strategy that will help you find entry points, as well as some money management rules. Moreover, having a trading plan is halfway to success. You should also learn how to stick to it in every particular situation;
• Think of trading as business. Unlike gambling, trading is a job. You should treat it like your own business, where you set your goals, calculate the amount of investment, analyze the market, and plan your eventual outcomes;
• Use technologies. Munehisa Homma (inventor of Japanese candlestick charts) drew candlesticks on a sheet of rice paper. He employed special signal men who used flags to transfer the information from the exchange to Homma’s house. Nowadays, things have changed. You have this whole set of technological tools that allow you to trade online and make price forecasts based on various technical analysis tools;
• Protect your trading risks. Whatever the situation on the charts is, you should never forget about protecting your risks. While using a strategy improves your chances, it does not guarantee that you will succeed in all your trades. Therefore, thinking about risks is crucial;
• Act as a student. Markets can be considered as teachers who teach lessons to traders every day. You should always learn from them as much as possible to become a better trader;
• Do not put at risk more than you can afford. Proper money management is the key to success. You should always consider the amount that you can afford to lose before placing a trade. By going beyond those limits, you may not only lose more than you can afford but also be under pressure, which will negatively affect your trading outcomes.

Key Takeaways

Before we end this article, there are some key takeaways that summarize all the ideas described above:

• According to the gambling definition, this is a type of activity when you wager money on an event with an uncertain and random outcome;
• Traders and investors should have a clear strategy that will define their market decisions. If you are opening any position without analyzing the asset first, you are gambling;
• Trading is not random, as all assets are influenced by macroeconomic or other data, including companies’ statistics if you are buying or selling stocks. Traders often use technical and fundamental analysis that allows them to make price predictions and reveal the direction of price movements. Moreover, the price can also be affected by investors’ and traders behavior and expectations;
• While financial markets can be totally unpredictable at some moments, in general, price movements have a logical explanation. For instance, if a central bank decides to hike rates, then the currency is likely to surge as demand for it rises among traders and investors. However, not all events are predictable that way. In case of natural disasters, revolutions, or other unexpected events, the price may act unpredictably. This is what makes trading and investing random at some points. Nevertheless, once the situation becomes stable, price fluctuations become more clear and understandable;
• Trading and, especially, investing, require diversification. If you want to become a successful trader, you need to watch for various assets and even groups of assets. For instance, you can choose several currency pairs that you are going to use in your everyday trading routine, or you can even diversify your trading portfolio by adding other classes of financial instruments and assets.

Conclusion

When thinking about binary options and gambling, you should keep in mind that everything depends solely on you. The fact is that your approach is crucial here. Whatever financial instrument you use, you can gamble if you don’t want to go any further than simply buying or selling it. The same is true with binary options. If you simply buy a Higher or a Lower contract randomly based on your luck and gut feelings, you gamble in this case. However, if you apply a strategy, use a systemized approach to trading, and conduct proper money and risk management, then your trading becomes a business.

FAQ

Is Trading Better Than Gambling?

Everybody decides on their own whether they want to trade or gamble. For instance, if you are good at blackjack or poker, you can try trading for thrilling emotions. However, if you step into the trading ground, you should keep in mind that the outcome is not random, as it depends on various macroeconomic and political factors.

Is Scalping Gambling?

No, it is not. At the same time, it may seem at first sight that scalping is simply guessing the price movement direction over a very short distance, but the reality is far from this assumption. Scalpers in binary options use various strategies to predict price fluctuations and have proper entry points. 

Can I Win Money in Trading?

Yes, you can. Both gambling and trading allow you to win money. However, the main goal in trading is not to make one successful trade. The idea is to make consistent profits over time so that your trading balance remains positive. 

Are Gamblers Good Traders?

When engaging in trading, you should learn a lot of new things, including technical analysis and even fundamental analysis, if you want to understand the reason for price fluctuations. Therefore, being a good gambler does not guarantee that you will become a successful trader. What defines a good trader is their ability to learn and adapt to constantly changing market conditions.