Binary options trading and its leverage make the investment method tempting for many traders. If you are interested in the strategy, it can, however, be challenging to find a suitable broker. Many nations have banned binary trading thanks to high risks and many scam providers on the market. Still, the trading method is popular, and many online brokers offer suitable services to their users.
The lack of licensing by official financial authorities makes it especially necessary to take extra care when looking for a binary options broker.
Which criteria are important for binary options trading platforms?
What is Binary Options Trading?
Binary options have risen in popularity as an investment form in the last few decades because they are simple yet have a high potential for an increase in capital. Here, the speculation will always return a binary result. You either win or lose completely. This makes it easy to understand and calculate potential risks and chances.
When we trade binary options, we speculate whether a stock market asset (like stocks, forex, or cryptocurrencies) that we use as a base value will fall or rise in value until the end date of our trade is reached.
Additionally, you can use leverage when trading with binary options. Here, the percentage of your win or loss is calculated using the total size of the trade, while you only pay a part of the investment money yourself. The rest is financed by the broker.
By practically lending money from the broker, but still receiving money based on the order size, your potential win is much larger than the sum you have invested. However, it is important to note that this leverage also applies to potential losses. In most cases, you need to pay the money you have lost back to the broker, leaving you open to losing much more than you actually own.
This simple strategy and the potential for high payouts have led to an increase in broker services for binary options in the last decades. Among these, providers offer differing service scopes and promotions (like this Quotex promotion code) to vie for the attention of potential users. But the same popularity and characteristics of binary trading have also attracted many scam services.
Why is Binary Options Trading Banned in Many Countries?
Binary options are not traded over official stock markets, but OTC (over the counter). Thus, they are prone to fraud in their applications. Many regulators have exposed numerous fraudulent services in the past.
At the same time, thanks to the use of leverage, many authorities classify binary options trading as gambling.
Factors like these have led many regulators in international jurisdictions to ban binary options trading. When we want to trade with binary options, we will not find brokers with licenses from these regulators.
Criteria for Reputable Binary Options Brokers
Usually, we can rely on licensed services when we want to use a trading platform that was tested and is proven not to be fraudulent. When we want to trade binary options, this might not be an option for the native trading services. This means we need to look out for several criteria when we are looking for a reputable binary options broker:
If we live in a country that has banned binary options trading, we cannot rely on our native jurisdiction’s licensing system. However, we can find brokers that are licensed in other countries that have not yet banned the use of binary trading.
If your legislation does not give licenses to binary options brokers, look for offshore brokers that are regulated by competent agencies.
Next to the license, user reviews and communities are a great way to find reputable services based on first-hand experiences with the broker.
If you want to form your own opinion, look for a broker that offers a demo account. Here, you can use fake funds to try out the service. You can experience trading based on the real market without any exposure to actual market risks. This way, you cannot only test out specific brokers but also try out different markets and trading styles.
Deposit & Withdrawal Conditions
Some brokers have specific conditions for deposits and withdrawals, such as a minimum amount you need to deposit before you can start trading. Most brokers charge a maximum deposit to create a legitimate account, however, some ask you to pay as little as $5 while others might expect three-digit deposits from the get-go.
It’s best to look for brokers with small minimum deposits when you start out as a trader. This way, you have not risked a large investment before you ever start getting to use the platform.
Additionally, make sure the broker does not hide fees and other limiting conditions for withdrawals in their terms and conditions.
Bonus offers and promotions are a broker’s way of attracting new users. The promotion should never be your prime deciding factor when selecting a broker. It can, however, be a great help when you are trying to decide between two potential services.
Make sure to read the TOS in this case, too. In many instances, you will need to stick to certain restrictions and conditions before you can access the promised reward.
Finding a regulated binary options trading platform is the most important factor when looking for a broker. Additionally, user reviews can help you find the provider with the best user focus and a service that is suitable to your specific investment goals. A demo account will help you get first-hand experience without being exposed to market risks. Lastly, the TOS for deposits, withdrawals, and promotions are important when you are looking for a fair, transparent, and trustworthy service.