Are All Binary Options Scams?
With so many binary options scams out there this is a legitimate question. Even though the binary options market is currently littered with scams there are legitimate binary options trading sites. Binary options themselves are simply simply a type of trade. It’s a way of placing a bet on whether you believe a financial instrument will go up or down or stay around its current price level. Since it is merely a type of trade, a binary option itself is not a scam. There are legitimate binary trading brokers. There are also scammy ones.
Why does binary options trading seem scammier than most types of trading?
It’s probably in part because it’s so popular right now. Anytime something becomes as trendy as binary options trading, there are going to be dishonest people who try to profit from it.
Binary Options vs Binary Options Scams – Compare The Popularity
And in some ways you can’t entirely blame them. Not everyone who trades binary options is a responsible trader. The vast majority don’t approach binary options trading with any discipline, money management or trading method, much less consistency in applying any of them. These people have already decided that winning or losing ultimately isn’t important to them (whether they realize it or not).
Avoiding Scams – Brokers vs Trading Systems
How can you figure out if you’re being taken in by a scam? First you need to learn to separate brokers from trading systems in your mind. A broker is a company through which you can trade on a binary options website. Brokers can be honest companies or they can be scammers who are trying to take your money.
Scammy brokers are more challenging to identify.
In other markets, there is more regulation. Not too many binary options brokers are regulated yet, and that includes the honest brokers. So you have to go largely based on reputation, reviews, and ratings. There are a few binary options brokers we recommend particularly, including Banc De Binary, TradeRush, 24Option, and AnyOption. There are other brokers we know you should keep the heck away from (see this), but a lot of brokers fall somewhere in the middle—no one knows enough about them yet to draw a decisive conclusion. We recommend you stay with a broker which already has a strong reputation and don’t take any more risks than necessary. Risk already plays a prominent enough role in binary options trading.
The other type of scam you’ll find are trading systems which promise to deliver amazing and impossible returns. Trading systems that promise unreasonable things are pretty easy to identify and to stay away from. Avoid systems that promise you can “turn $500 into $5,000 in a day,” or “Make $1000 a day on your computer,” or “Make 100% every day with binary options.” Systems that can achieve a more reasonable rate of return (65-85%) may actually work, but only if you apply them properly and conditions don’t change too much, after which you may need to adjust them.
Questions to Ask About a Binary Options Broker
When you’re trying to select a binary options broker, you should do so with care since many binary options brokers are scammers. There are other reasons you should choose carefully however as well. All brokers have slightly different offerings, so you want to choose a broker whose product fits your needs. Here are some questions and considerations to take into account before you put money into a binary options account. We’ll group the questions and considerations into those surrounding trust and those surrounding features.
What types of binary options trades can you make on the site? Along with the standard High/Low trades, can you also place One Touch or No Touch trades or Boundary trades? What expiry times are available? Does the broker offer Option Builder, which lets you choose your own expiry period? How much control do you have over your trades once you’ve made them? Can you rollover or double up? Can you close a trade early if it’s going against you?
How many trading instruments are available? If you’re a US trader, which assets are you allowed to trade? Many brokers do not allow US traders to trade currencies or futures.
What is the minimum and maximum trade amount? Is it flexible enough for you given your bankroll? Can you use effective and conservative money management rules under the restrictions imposed? Is there an upper limit to total trade exposure or just a maximum amount per trade? Will you “outgrow” this broker when you have a lot more money in your bankroll?
What are the deposit methods and currencies? What is the minimum deposit? How can you withdraw your money and how quickly can you get it? Is there a minimum withdrawal amount? Are there fees for withdrawing or for anything else?
Are there bonuses? If so, what type and how much? Do they work based on a leverage system where you have to turn over the money a certain number of times to claim it? Or is it a straight up cash bonus (uncommon)?
Is a demo account available? This feature arguably falls under trust, since a demo account demonstrates that the broker is looking for long-term clients. If there is no way to demo, the broker has not provided you with an essential learning tool. Demo accounts aren’t very common among binary options brokers yet, but look for them to become more so in the coming years. If you do find a broker who offers one, that is a huge plus.
Is the Broker Trustworthy?
Does the broker have positive reputations on the legit review sites, listing portals, community forums and trading sites? This is the biggest factor to consider and the one that the editors of binaryoptionsbrokers.ca use themselves in addition to trading their themselves to determine which brokers are listed as recommended.
Regulation does not mean reputation! Is the broker regulated? This isn’t a requirement at this point in time, though when more brokers are regulated it probably should be. At this time there are many good brokers who aren’t regulated yet, so it’d be a shame to overlook them in your search. Still, though, if you find a broker who looks like it offers everything you need, has a great reputation, and is also regulated by some financial authority, that’s a nice plus as far as trustworthiness goes.
Is the binary options trading site navigable and informative?
Do you have to search everywhere for basic information, or is it relatively easy to find answers to most of your questions? Is the information you find consistent, or does it contradict itself? How established does the company appear to be? Does the site provide you with basic warnings and risk disclaimers? Or does it just seem designed to persuade you to part immediately with your money?
Are there educational resources and trading tools provided?
Does the site include helpful things like economic calendars, expert analysis and news, e-Books, seminars, consultation services, articles and videos? If so, how informative are they? Do they cover the bare minimum of how-to topics, or do they delve into technical and fundamental analysis and teach you techniques for trading? In other words, does the broker want you to learn and become a long term, successful customer? Or does the broker want throwaway customers who will go broke trading in their first week? Are the extra features available to you no matter how much you invest, or are they only available for customers with larger trading accounts?
How is the customer service?
Are they available 24/7 or 24/5? Are they actually available when they say they are through the channels they promise you can reach them on? If you get a hold of them via phone or chat, are they polite, friendly, and helpful? Are they knowledgeable and patient? Do they try and hard sell you? If you send an email, how long does it take them to respond? Do they respond in the timeframe they say they will? *for amazing live customer service it is hard to beat Banc De Binary (www.bbinary.com).
Finally, be sure to check other customer reviews. Find out what third-party review sites have to say about the binary options broker, and what kinds of ratings they’ve garnered on other sites. Have they won any awards? Do customers have specific complaints about them? If so, are they complaints about things which you think will affect you or not? Since you’re going to be investing your money with your broker, you deserve absolute transparency, speed answering your questions and executing your orders, and superlative service in every regard.