Digital options: Gambling or investing?
One of the top discussions on investors’ lips is whether digital options is a form of gambling. The main argument is that the marketing methods and trading mechanics are identical to the ones used in the gambling industry. We will be taking an in-depth look as to how true this is.
In digital options, there is a “turbo” mode with an expiry time of 30 seconds. This also has the highest potential profit. Arguably, the short expiration time makes it near impossible to make a data-backed judgement. Consequently, some deem this as evidence that digital options investors are being ‘forced’ into guessing/gambling.
Notably, experienced digital options traders don’t make rash decisions. As a result, they are unlikely to opt for the turbo option. Longer expiration times are less profitable; however, they allow for more in-depth analysis.
Most digital options platforms aim to attract people who aren’t your ‘traditional’ investor. They are heavily marketed as being an easy way to make money. As a result, most people who trade in digital options are simply guessing or trying to look for patterns. In my opinion, even real estate investors become gamblers the moment they begin to use guesswork or emotions as an investment strategy.
People rarely think about the possibility of loss. Their eyes glaze over at the thought of getting a new car or mansion with their winnings. They aren’t interested in learning how to trade. They want quick and easy money.
It is worth taking a look at the mindset of a gambling addict in order to see whether we can spot any similarities with that of a digital options trader. Contrary to popular belief, gambling addicts aren’t motivated by winning. This is why whenever they win, they gamble it all away. They are motivated by the thrill of staking a bet. The excitement of risk can be addictive. This is why some get into debt or even commit fraud in order to keep gambling.
Much like hard drugs, gambling produces a high which increases the likelihood of the behaviour being repeated. From a psychological perspective, this is an example of classical conditioning.
On the other hand, digital options borrow some elements of online gambling. Top brokers use graphics and sounds to encourage people to keep trading without noticing how much they are spending. Therefore, if one approaches digital options with a gambler’s mentality, they will make the same decisions.
Elite digital options traders begin each session with a budget and target return on their investment. They make calculated decisions. There is a reason for each trade. They look for the perfect moment to trade. Like a hunter they are patient. They leave once their daily budget is depleted or they hit their target profit. Moreover, their bills will still be paid no matter what happens on the trading floor.
You must trade with the assumption that you can lose it all. In fact, more than 80% of digital options traders make a loss. However, you can beat the odds by doing the following:
1) Research and dedication
Nothing good comes easily or quickly. If you think that you are just going to sign up to a digital options trading platform today, and guess your way to riches, you are sadly mistaken. The best digital options traders conduct a lot of research into their chosen commodities, shares or currency pairs. They aim to know a lot about a little. Moreover, they review every trade: win or lose. This enables them to spot opportunities for adjustment.
This strategic way of trading is a world away from the click-and-hope approach of most digital options traders.
2) Opt for medium risk trades
Trades with short expiration times can ‘force’ traders into guessing. They are attractive because of the high potential returns of 80%+. However, top digital options traders prefer to exchange reduced return per trade for increased accuracy. As a result, they make more money than traders who opt for maximal risk.
3) Money management
It would help if you were strict with your investment budget. Gambling addicts will try to spend their way out of a losing position. They believe that a long stretch of wins is just around the corner. If you are making consistent losses while trading, there is something wrong with your strategy. Elite digital options traders stop investing once their daily budget depletes.
Moreover, a common mistake is to keep re-investing your profits in the hope that the power of compound interest will make you a millionaire within a short period. Smart digital options investors are disciplined with when they make withdrawals. This is because no matter how robust their strategy is, it can’t work forever. They understand that a bad trading session can wipe out their profits.
To conclude, digital options isn’t gambling. However, anyone who approaches it with a get rich quick mentality will treat it as a casino game. Personally, I don’t think there is anything wrong with gambling. When done with a strategic mindset, it can be a good way to make some extra money. Notably, that is the same for any money-making venture. Guesswork isn’t an effective long term strategy.