5 Signs A Broker Is Trustworthy
One of the most intimidating steps in becoming a binary options trader is figuring out who to invest your money with. With any type of trading, this can be tough, but you have no doubt noticed how many scammy brokers operate in the binary options market. Why are there so many untrustworthy binary options brokers? Because the binary options industry is almost entirely unregulated. We’ve come up with a list of positive signs that you can trust a broker you’re investigating though. Check it out.
- Regulation (no many as a binary options broker yet).
- Educational resources and trading tools on the site.
- Option Builder.
- Transparency and risk disclosure.
- Top-notch customer service.
- Bonus Feature: Reputation
There are a couple of countries that are presently laying the groundwork for binary options regulation, most notably Cyprus. As such, you will find a lot of binary options brokers with Cyprus headquarters. In spite of this, it is important for you to know that at this time, outside of Nadex (here), you’re probably not going to find any company which is actually regulated as a binary options broker by the US regulating bodies. The current exception today is Banc De Binary. They were officially regulated by CYSEC on January 7th, 2013.
Learn more here: https://www.bestfxbrokers.com/binary-trading/broker-reviews/banc-de-binary-review/
There are however companies you can trade with that are still regulated. Many of them are regulated as Forex brokers (because they also deal in Forex). Some are regulated by gambling commissions (because let’s face it—that’s how most people trade binary options and how the US government classifies the trades). Others are regulated as private banks. Any type of regulation you can find is a plus. It may not cover everything regarding how you trade, but it will certainly protect you in some ways.
2. Educational Resources and Trading Tools
At a minimum, you’ll find a glossary, FAQ, and some simple how-to documents on most binary options websites. This is not sufficient educational material to teach you how to trade. And to be honest, even at best you will not find enough material to make you successful. But we like to see brokers that at least provide you with a start. Look for a company that provides daily and weekly market reviews, and also some materials that introduce you to different trading techniques. Again, you are still going to need to come up with (or find) a trading method which will work for you and which includes entry and exit rules and rules for money management. You can find thousands of free trading techniques on trading community websites.
Why is it so important that a broker provide you with educational resources, trading alerts, one-on-one training and so forth if you’re still going to have to do a lot of research on your own? Because it shows that they are at least trying to get you to learn something and not just plunge in and lose all your money. It demonstrates their intent to build long-term relationships with repeat customers, not simply to take your money and run.
3. Option Builder
On most binary options broker websites, “Option Builder” is listed as a type of binary options trade where you can set up some specifics on your own, including the expiry time. This is a great tool, and arguably an indispensable one. If you rely on a broker to set your expiry times, you set yourself up to fail in two different ways. The first problem with doing this is that many brokers choose expiry times which they expect to serve them in some way, and not you. The second problem is that you have less control over what you are doing and may have a more difficult time using a system to trade. The expiry time needs to conform to your exit rules. So if you do not have the capability to set it yourself, you have fewer trading opportunities as you cannot take a trade without a good expiry time—even if it has a great setup otherwise.
The more informative a broker is, the better. This includes providing you with information about trading, binary options as an industry, and the company itself, not to mention all of the features. If you find yourself having to run around all over the internet just to discover basic information about a company, that is not a good sign. If you can answer most of your questions just by looking on the site itself, that is a good sign. Companies which display prominent risk disclosures and warnings are more transparent than those that don’t do this. Transparency also comes in the form of good customer service. If an agent will not answer your questions, that should be a red flag in your mind.
5. Top Notch Customer Service
This is probably the best single sign that a company is going to be trustworthy, and it’s not too hard to figure out whether you are getting good service or not since most binary options websites have terrible or nonexistent service. How many times have you gotten on the live chat feature on a binary options website only to find no one there to talk to you? It happens to us all the time. If someone actually is available, that is a good sign, and if that person is knowledgeable, fast, and friendly, that is an even better sign. If you send an email to the company and no one responds to you within a couple of days, that’s unacceptable. If you receive an email after a couple of weeks, just think how angry you’d be if that correspondence involved your real money.
In terms of phone service, you should expect a customer service agent to be able to readily answer your questions and address your concerns, but not hard-sell you on getting set up with an account and depositing money. If you get a hard-sell, you may want to look for another broker. Customer service should be there to serve you first, the company second.
Bonus #6 Reputation (We Love To Over Deliver)
Finding a trading website with a positive reputation overall. Lets be honest and say that it is not that easy to do. Even among the extremely popular trading websites listed here, there are often times complaints of bad practices. There are plenty of complaints that look completely legit and there are complaints where it is obvious the trader is sour because they gambled away their money. Before signing up, hit up google and search for the broker and a keyword like ‘scam’ or ‘complaints’ or ‘testimonials’. Look for websites, comments and reviews you can trust. Stick with the big guys who have been around the longest. Their reputation is more important to them than any one traders wins or losses.
Now you should have a better idea what to look for when you visit any binary options website for the first time. If a company has great customer service, plenty of resources and useful tools, lets you set your own expiry times, and has good policies all around, they may be worth a second look. If they are regulated and registered under some financial authority, that is even better. If you don’t find these good features, you should keep searching, or check out our list of favorite brokers.