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:
- How safe is it to keep your money with the broker under consideration? What mechanisms exist to ensure that your money is safe?
- What are the trade conditions like using the broker in question?
- Are payments of profits prompt?
- Are there any bad reviews in existence for a particular broker?
- 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 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 2012, 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.