All right, in Indonesia, binary option is currently a booming topic in which many Indonesian people perceive binary option as gambling (in Indonesia, gambling is not allowed) rather than trading. In return to the booming topic, many people mistook a binary option as the same as forex trading while the truth is really far from it. In this article, I want to point out that forex and binary option are not the same. Aside from that, we can learn something from Monica's experience that can be seen in this article if you read this fully.
Binary Option Definition
Well, before we delve into Monica Christy's case, it is better to know the definition of binary option. If you have just come into trading, then, this will be useful for you to avoid a binary option and know the difference between forex and binary option. The binary option itself as I previously mentioned is currently a hot issue in Indonesia because this binary option took many victims of Indonesian people who have lost much money from it to the case of committed suicide which you can see from CNBC Indonesia (Indonesian language, though you can translate the page in English) here.
According to Lucas (2021), the binary option is deemed as a financial product where the buyer and the seller can do a transaction that is based on expiration time and he also refers that the outcome of "binary" comes from a "yes or no" proposition. This means that if you put a buy position in one minute and after one minute expired the result is right you will rake profit from it at around 80%. However, if the result is wrong you will lose 100% percent of your money. Honestly, from how a binary option works I can only see it as a casino rather than a trading platform.
From the risk-reward ratio is already clear that the binary option has a 1:0.8 risk-reward ratio which in the long term might not help you at all particularly if you use the martingale technique where you double up the position if you lose on your first position, for example, you lost $100, then the next position you put $200 to "cover the lost" you incurred (and so on until you lost all of your money). It might seem "good" in the short-term time because this is related to instant gratification mode but in the long term, you will realize that you will only incur more losses if you keep "trading" the binary option which we can see from Monica Christy's case who lost 122 million rupiahs from it.
Forex Definition
Previously, I have covered the foreign exchange definition. To sum up, forex in a simple way is a foreign exchange where you buy one currency and you sell one currency in return. We all know that forex always comes in pairs such as EURUSD (one of my favorite pairs that I trade often). In forex, there is no expiration time like a binary option because we can open a position with no expiration time (as long as you have money in it) and close the position whenever we want or if you are a professional forex trader you may already familiar with the position that is closed by the stop loss and take profit. This means that Forex and binary option are not the same.
Another difference between forex and binary option can also be seen from its risk-reward ratio. In binary option, your risk-reward ratio is fixed to 1:0.8 (or even lower than that like 1:0.7). This means that in binary you take 1 risk to get 0.8 rewards, which does not make sense, right? On the other hand, we can manage our risk-reward ratio in forex, for example, 1:1, 1:2, or even 1:3. It might seem that in the binary option you can win (but not profitable) in the short-term but in the long term, you will lose much money from it due to its risk-reward ratio while in forex you can adjust your risk-reward ratio to maximize your profit and become a profitable forex trader (if you have mastered and applied the three pillars of successful traders).
Monica Christy's Case
Now, who is Monica Christy? How is she related to the binary option? Okay, to answer it you might want to visit her YouTube but let us focus on the summary. In a nutshell, Monica Christy is a victim of binary option who has lost 122 million Indonesian rupiahs which you can see in the video below that I attached. In her YouTube video, she said that the total loss she has incurred is 122 million Indonesian rupiahs. From the video she has uploaded before she revealed her total loss, I perceive that she "traded" the binary option using the martingale technique which eventually led her to the loss of much money. So, the martingale combines with the short-term "trading" in binary option is a good combination to make you poor. To have a clear explanation, you may want to see her video below here (the video is in the Indonesian language).
Monica Christy's Video Who Stated In Her YouTube Video That She Has Lost 122 Million Rupiah From Binary Option
Conclusion
From this, we all can learn that before we delve into something, we, at least, have to know something about what we want to delve into and prepare for the consequences before the bad things happen to us. Just like Monica Christy's case who has lost 122 million rupiahs in binary option and maybe many people like her who lost much money in binary option, my suggestion is that it is better to avoid binary option if you are new to trading and start seeking for a long term trading from mutual fund first and upgrade your psychology before you go into stock, forex, and cryptocurrency. Well, I hope from this article you now know the difference between forex and binary option so that many people will not get confused by those two different entities.
Written by Andre I.
References
christy, monica. 2022. INI RIWAYAT TRANSAKSI AKU 🥺 LOSS 122jt DI BINOMO. (THIS IS THE TRANSACTION HISTORY THAT I LOST 122 MILLION RUPIAH IN BINOMO). Retrieved from YouTube. (Accessed 5 March 2022): https://www.youtube.com/watch?v=OnXjBOawo94
Downey, Lucas. 2021. Binary Option. Retrieved from Investopedia. (Accessed 5 March 2022): https://www.investopedia.com/terms/b/binary-option.asp
Tim Riset. 2022. Korban Judi Binomo Menjerit! Banting Laptop Hingga Bunuh Diri. (Victim Of Gambling Binomo Screaming! From Slammed Its Laptop To The Case Of Committed Suicide). Retrieved from CNBC Indonesia. (Accessed 5 March 2022): https://www.cnbcindonesia.com/market/20220127120335-17-310895/korban-judi-binomo-menjerit-banting-laptop-hingga-bunuh-diri