Important Things to Look Out for When Choosing a Binary Options Broker

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Six Things to Look at When Choosing a Broker

January 9, 2020 2:37 pm

If you’re looking for a new binary options broker, you probably have questions about which one is the best. This is a valid question. Having the best broker on your side drastically reduces the amount of risk that you will have, and it ensures that your money is doing what you intend it to do. A good broker won’t necessarily make you a profitable trader, but it will go a long way toward ensuring that you aren’t losing money needlessly. All traders have different needs, so it’s important that when you are looking for a new broker, you don’t just choose the one that everyone else says is great. You really need to look at your individual situation.

With that said, here is our list of the top things that you should look for when choosing the best binary options broker for you.

  • Legality. Is the broker that you are looking at legally allowed to operate where you live? Because of the internet, you can access websites from all around the world, but that doesn’t mean that you can just choose to work with any broker you want. Before you decide which broker is best, make sure that they are allowed to accept traders from where you live, and that your country of residence allows you to trade at their site. For example, traders in the United States cannot legally use a CySEC regulated broker, but need to stick with Nadex since they are regulated within the U.S.
  • Reputation. Some brokers have better reputations than others. You don’t want to deposit money with a broker that has a reputation for poor quality financial transactions, for example. Even if you never experience a problem on this front, working with a broker that drags its feet when it comes to processing withdrawal requests is a dangerous thing to do. Also, not all broker uphold the high standards that you deserve from your binary broker. You want a broker that is fully regulated by a high quality regulatory body. For example, ASIC in Australia, CySEC is Europe, or the CFTC in the United States are all considered to be the best regulatory bodies in their respective regions. An unregulated broker might have pure intentions, but there is a much higher risk to your cash when you work with one.
  • Ease of Use. The broker that you decide to use should be easy to navigate. They should have a platform that you can use with ease and not make careless mistakes. If you can, you should definitely try out the free demo account that your binary options broker offers. If you’ve never used a site before, there’s a chance that user error might come into play, and you could make a mistake. Testing out the site in a risk free setting with a no risk demo account using fake money alleviates the chances of this happening. Also, all transactions with the site should fit your needs. We hinted at the need for smooth financial transactions earlier, but this is a must. Your broker should make it easy to put money in and get money out of your trading account. The broker does need to follow the law when it comes to financial transactions, and you should not expect them to bend the rules for you, so knowing the regulations and what you need to do on your end to make transactions smoother will be an easy way to make this experience even more pleasant. Also, broker that have an auto trading robot, may help you get started as well. Remember to ask customer service when you open the account.
  • Returns. Some brokers return more than others. Even the difference of a few percentage points here or there can make a big difference over the course of time. Let’s say Broker A offers 78 percent on the asset you like to trade most, while Broker B offers 80 percent. With all other things being equal, choosing the larger number can mean thousands of extra dollars in profits. If you risk $50 per trade and make 1,000 trades in a year (less than 3 per day), you are potentially gaining $1,000 extra in profits over the course of time by going with the better return. Most traders make many more trades than this per year.
  • Educational Material. When your broker offers you free resources to help you become a better trader, you know that they are more likely to be on your side. These come in a lot of different forms: free eBooks, webinars, strategy videos, economic calendars, blogs, and news feeds are some of the more popular resources. All of these things are available for free around the web, but having a broker supply them for you can make your life a lot easier so that you don’t need to search around and find the tools you need to improve.
  • Bonuses. Some brokers offer you a bonus when you make your first deposit. Although this can be helpful, it’s really the last thing that you should consider when choosing your broker. But why? Isn’t free money a good thing? Yes, free money is nice, but that’s not quite what a bonus is. In fact, brokers want you to think of a bonus as free money to you because it is good business for them if you do so. Why wouldn’t you want an extra $500? However, because most bonuses are so hard to unlock, most traders never actually get to see their bonus cash. Brokers require you to trade at least 30 times the bonus amount if you want to see your bonus returned to you. So, if you received a $500 bonus, you would need to trade $15,000 worth of trades before you could unlock your bonus. Some brokers even put a time requirement on this, after which the bonus cash disappears. A new trader without experience is very unlikely to receive this bonus because they will lose their money long before they ever reach that threshold. A bonus can be nice, but make sure that it is not a priority when choosing your broker. Otherwise, you are just falling for a marketing gimmick. Be sure to check each of the steps listed above before you think about getting a bonus.

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Important Things to Look Out for when Choosing a Binary Options Broker

Regulated Brokers

The first thing you need to ensure is that the binary options brokerage is regulated. It is very important to choose a regulated broker as this means there is some government oversight looking out for the investor, even if the regulatory authority is not within your local jurisdiction.

Many regulated binary options brokers today are under the supervision of Cyprus Securities and Exchange Commission or CySEC. This commission is part of the MiFID provisions, which is the law governing harmonized regulation between all members of the European Union, giving CySEC regulated brokers immediate access to every market that complies with MiFID.

CySEC is very active when it comes to protecting the European public from financial scams. If the broker is not abiding by the rules and regulations of its license or if it is falsely posing as a CySEC regulated broker, the regulator will use all the tools at its disposal to deal with the unlicensed entity.

Speed of Execution / Ease of Use

Some binary option brokers have better user interfaces than others. Others may have faster execution times. The better brokers usually offers mobile trading as well and even let you try out their trading platforms without the need to sign up with them first.

Asset Classes & Payout

Not all brokers offer the same set of tradable assets. Don’t assume that just because Broker A offers binary options for Facebook stock means Broker B will offer that as well. Even if Broker B does offer Facebook stock to trade, the payout may also be different.

Demo / Trial Account Availability

Do not use a binary options broker that does not provide a demo trading account which lets you try out your strategies using virtual money. Also, make sure the demo account is using real live market data and not pre-recorded data streams.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    1st Place! Best Binary Broker 2020!
    Best Choice for Beginners — Free Education + Free Demo Acc!
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  • Binomo
    Binomo

    2nd place! Good choice!

Beginners are highly advised to practice trading using the demo account until they can place winning trades consistently before they dive in with real money.

Ease of Withdrawals

Some brokerages are notoriously slow when it comes to paying their client back their money. Even if you like everything else about the broker, always make small test withdrawals before depositing more money in the account. It shouldn’t take longer than 3 to 5 days for any broker to transfer money to your account.

Continue Reading.

What are the Main Types of Binary Options?

Learn how the One-Touch, No-Touch and Range/Boundary binary options differ from the common high-low viety and how to trade them. [Read on. ]

What Assets can be Traded using Binary Options?

Many of the most popular financial instruments such as currency pairs, equities and commodities are available to trade using binary options. . [Read on. ]

Binary Options: Trading or Gambling?

Is binary option a legitimate financial instrument or just another form of gambling. [Read on. ]

Binary Options & Trading Robots: A Perfect Match?

Unlike humans, robots have no emotion and do not need to rest, so they can make a lot more trades than humanly possible, combined with perfect consistency. [Read on. ]

Is Binary Options Trading a Scam?

Learn how you can get scammed when trading binary options if you are not careful. [Read on. ]

How to Select a Binary Options Broker?

With so many scam brokers out there, before you learn how to trade, one must know how to separate the wheat from the chaff and find a trustworthy binary options brokerage. [Read on. ]

Binary Options: Calculating Breakeven Win-Rate for a Given Payout

How often does my trades need to be successful in order to be consistently profitable in the long run when trading binary options. [Read on. ]

How to Choose a Binary Options Broker

Unless you will be trading with the North American Derivatives Exchange (NADEX) which gives traders who are US citizens or resident in the US direct market access to trade binary options, you will need to conduct your business using a binary options broker. Binary options brokers are many and they differ in the number of assets they offer to traders as well as the trade contract types and general trade conditions they provide. So when choosing a binary options broker, you need to factor in these parameters before settling down on a broker to choose. The discussion that follows highlights the most important things a trader should look out for when choosing a binary options broker.

The following factors are important aspects of your binary options career you should seriously consider when scouting for a broker:

  1. How safe is it to keep your money with the broker under consideration? What mechanisms exist to ensure that your money is safe?
  2. What are the trade conditions like using the broker in question?
  3. Are payments of profits prompt?
  4. Are there any bad reviews in existence for a particular broker?
  5. What funding and withdrawal options are available for the broker under consideration?

If you can get satisfactory answers to this question, then that broker should be your dealer of choice.

Safety of Funds

This is paramount when venturing into any trading business. Mechanisms exist to ensure that the broker you intend using is not a briefcase broker or a fly-by-night broker. Registration with regulatory authorities is one of such mechanisms. To get registered with a regulatory body, a broker must have an office with qualified staff, and must have a certain capital requirement to ensure that they can effect prompt settlement of traders’ claims. There are other regulatory requirements. The key thing is: use a regulated broker.

Trade Conditions

Trade conditions include but are not limited to the following:

  • Number of assets available for trading: The best brokers are those who offer assets traded on various exchanges with a wide geographical spread. For instance, a trader living in the Middle East will be more conversant with assets listed on an exchange like the Tadawul, a trader living in Russia will be more conversant trading securities like Sukol or Gazprom as opposed to trading Barclays, accompany he knows next to nothing about. You may be surprised to know that many traders in some obscure regions of the world probably heard of Barclays for the first time as a result of the Libor scandal.
  • Flexibility in expiry times: There are brokers who have their own preset expiry times which a trader must choose for a trade. This sort of rigidity will not work well for many traders. It is usually better to choose a broker that offers some flexibility in choosing trade expiry dates and times.
  • Availability of assets for trading: Beware of brokers who constantly freeze out assets and make them unavailable for trading when it looks like a market move is about to occur. Binary options trades are based on market moves, so if a trader cannot trade an asset’s move, what is the essence of the whole thing in the first place?

Settlement of Claims

If a broker cannot pay a trader profits when withdrawal claims are made, it is a clear sign of financial insolvency and you should not touch such a broker with a totem pole. TraderXP is one such broker that as at May 2020, was having such issues and yet they kept bombarding people with emails, desperately trying to get new money. Was it to settle outstanding claims? This is why it is necessary to search for broker reviews as this is the only authentic way to ensure that your money will not be used to settle outstanding claims of traders already trapped.

Funding and Withdrawal Flexibility

A good binary options broker should be able to offer a wide array of options for traders to fund their accounts and withdraw profits. However, this should not take pre-eminence over the ability of a broker to settle claims.

By the time a trader has taken the time to use these parameters in sifting out bad brokers, he will end up with a competent one that can handle his business.

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Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    1st Place! Best Binary Broker 2020!
    Best Choice for Beginners — Free Education + Free Demo Acc!
    Sign-up and Get Big Bonus:

  • Binomo
    Binomo

    2nd place! Good choice!

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