Finding the Best Binary Options Brokers
Finding a good binary options trader can be difficult. They need to give you the right tools and access to appropriate markets. Since we are dealing with our personal data and financials, we also need to make sure the service we pick is trustworthy. This can be challenging, since we cannot rely on the usual help of licenses and regulations. What is the deal with binary options brokers and regulations, and how can we find a good trading platform for binary trading regardless?
Binary Options Brokers and Regulations
Most countries have a legal framework when it comes to financial institutions and any financial instruments and services. To protect their citizens and create a beneficial market, they – like the European Commission – create directives and authorities that overlook its implementation and adherence to these laws.
Part of these regulations are regulatory bodies that give licenses to trustworthy online brokers. They check the service and continue to control it to make sure the investors are protected.
These authorities keep an eye on the market and adjust the regulations when they find new threats. This happened in 2018, when the European Securities and Market Authority (ESMA) banned trading with binary options. There are two reasons for this ban:
- They consider the practice close to gambling and fear it causes gambling addiction and uncontrolled losses.
- They have found especially many fraudulent services offering trading with binary options.
To reduce these threats, they have banned the trading method altogether instead of implementing further restrictions. For this reason, any binary options broker is unable to gain a license helping them prove their trustworthiness easily.
Trading Binary Options
Binary Options are a trading asset that is famous for its high risk. Volatile markets and financial instruments are, however, known to bring in the highest profits, even in short timespans. This is why many traders who aren’t risk-averse favor this kind of investment.
The basic transaction when trading binary options is to speculate whether an asset will rise or fall in value. The trader selects an asset the binary option will be a derivate of, picks a target prize, and chooses an end date for the speculation. This means there are more factors involved in this kind of trade that could influence the success of an investment, including the timeframe and chosen target prize, than just the market value of an asset.
Benefits and Risks of Binary Trading
Many binary options traders trade with leverage. Here, the broker practically lends the trader a part of the investment sum for a specific trade volume. The client itself only has to pay a fragment of the transaction’s total cost. If the speculation is correct, they gain the profit based on the total trade volume instead of just their smaller investment. If the prognosis the trader made fails, he does, however, also lose money based on the total sum. He now has to pay back more money than he initially risked to the broker.
When trading with binary options, you can also profit from downwards movements on the market.
You can find more specifics about trading and its strategies in our financial glossary.
Finding Binary Options Traders
It is up to the trader whether they want to trade with binary options and accept these risks. If they do so, they will have to pick a binary options broker without a license. This can leave them open to scams, since these services are not regulated by any government. If you want to find a good binary options broker, you must consider some factors:
● Terms and Conditions
Read the contents of the broker’s website. It will give you a better feeling for the service and their focus on the investors’ safety. If they have sections that clearly and transparently state the risk of trading and binary options trading specifically, that is a good sign.
When you register an account, you agree to the terms and conditions listed on the website. It is entirely possible that there are demands and prerequisites in these conditions that are considered unfair. If you agree to them, however, the service can still use them without fallout. Also be aware that a scam broker can easily ignore any legal ramifications typically applying to licensed services.
● Safety Measures
You can use some safety measures you implement yourself. This includes a good risk management. Limit the amount of money you invest over the platform and never risk more than you can afford to lose. Be especially careful with leverage.
Additionally, try to withdraw any profits immediately. Once they are on your bank account, the provider cannot withhold them from you.
● User Experience
The experience other users of the service have had is especially helpful. People who have been scammed by a broker are especially vocal about it online. If you google the service, you will find many reviews, ratings, and maybe even complaints, if the provider has acted suspiciously. Make sure to compare many different sources, in case one of them has been paid to advertise the service.
Conclusion
When we want to trade with binary options, we have to accept the risks that come with this trading strategy. This includes the lack of regulation for brokers that offer binary trading. In these cases, online reviews and user experiences are your most important tool in finding a service that has been reliable to other clients. Additionally, you should always take extra care regardless and manage the risks as efficiently as possible.
Interesting Related Article: “The advantages of using brokers located overseas“