Binary options trading is controversial, but still safe – but you do need to make sure to trade with a legit and fair binary options broker. This is how you can tell a good one from a bad one.
Choosing a Binary Options Broker
Within the past years, binary options trading has become really popular – possibly because the so-called all-or-nothing options come with a clearly defined risk, which makes trading more calculable.
But just like with any other kind of market investment, the choice of broker has a major impact on whether investors achieve their goals or not.
Binary options still are a controversial financial instrument among traders and regulatory authorities worldwide.
Yet, the volatile type of trading isn’t more unsteady than other investments – as long as you make sure to invest with a legit binary options broker.
What’s a Binary Options Broker?
Binary options brokers are online brokers that don’t just sell stock market shares, cryptocurrencies, commodities, precious metals and the like, but that also sell financial derivatives. When investing in options, you don’t directly buy certain assets.
Instead, you make a prediction on how the assets will perform at the designated expiration date. That means, you place a bid on an underlying asset.
Binary options are easier to grasp than other types of options – especially for beginners. All you need to do is give a prognosis on whether your underlying asset will be performing above a certain price level at a certain time in the future.
If you’re positive that it will, you buy. If you’re negative, you sell. As binary options are a special kind of option, it’s important to look for online brokers that specialize on trading binary options and not – for example – on robo advising.
How to Find a Binary Options Broker
Binary options trading is legal in the UK, at least for traders. UK-based brokers aren’t allowed to sell binaries, though. That poses a challenge to UK-based investors, as they need to find a foreign broker.
Trading with an online broker, which is not based in the UK, can be totally safe and allow for successful investments – but you do need to make sure to find a legit one.
Reading reviews is a good way of gathering information about brokers that have sparked your interest. But it’s important to look for high-quality reviews that pay attention to all relevant issues.
This full RaceOption broker review is a perfect example of both what a review should include and what a good binary options broker offers. Always make sure to check the following criteria:
Check If the Broker Is Regulated
The broker’s regulatory status is the first thing you should check, as safe trading can only be guaranteed with a regulated broker. Make sure to find an official reference to either the CySEC, the ASIC or the FSA.
Compare Bonus Offers
Many brokers offer their new customers a deposit bonus, which is supposed to act as a welcome incentive. Before signing up with a broker, compare the bonus package to others to make sure you’re making a good deal.
Keep the Payout Percentage in Mind
The payout percentage tells you how big the share is that a broker ends up paying out to customers in proportion to all the deposits made. High payout percentages can reach up to 90 percent, most brokers claim to have a payout rate of about 85 percent.
Look for Minimum Initial Deposit Requirements
The minimum initial deposit requirements are particularly important to beginners. That’s why it’s good to have a look at the stipulations. Some binary options brokers will let you trade a first deposit of $5, others will require you to deposit a bigger amount.
See If You Can Open a Demo Account
Even though binary options are easy to trade, because you only have to make a single yes-or-no decision, practicing before your first investment is always a good idea. Many good online brokers will offer you a demo account, where you can invest play money until you get the hang of it.
Check Conditions for Deposit and Withdrawal
It’s only possible to withdraw money for verified investors. As the authentication process can vary, make sure to educate yourself about the conditions concerning deposits and withdrawals before signing up.