One of the most important things for binary options trading is to pick a good and trustworthy broker. Below you will find frequently asked questions and a comparison with the best brokers.
01. What is a binary options broker?
02. What is a regulated binary options broker?
03. How to pick a good binary options broker?
04. What is a minimum deposit a broker requires?
05. What early signs are that a broker might try to scam me?
06. How do I know if a binary broker is a trusted one?
07. Are the reviews about a binary options broker genuine?
08. Should the broker offer a demo account?
09. Is the information in learning centers valid?
10. Should I trade with a binary options robot if the broker offers it?
11. Are binary options brokers that offer also forex trading more reliable?
12. Is mobile trading important?
1. What is a binary options broker?
A binary options broker is an entity that provides the infrastructure needed to trade binary options. Such a broker is needed in order to place the call or put options and in general it provides access to the financial markets.
The broker gains from the difference between the price at which the option is opened and the one that is closed and also from the number of options being traded, this being highly dependent on the number of clients the broker has. Binary options brokers offer the possibility to profit from the swings in the currency market, commodities or stock indexes, by choosing the direction and expiration date of an option.
2. What is a regulated binary options broker?
Regulation is a must when it comes to trading with a broker, no matter the market you are dealing with. Regulation comes with clear rules that the broker must comply and from this point of view not all brokers succeed in being regulated as fulfilling those rules is a costly process. However, traders are putting a great emphasize on a regulated broker and it is strongly recommended to trade with such a broker. Regulation comes in handy as well if the broker gets into troubles, for whatever the reason. If this is happening, the financial authority that regulates the broker steps in and makes sure clients won’t have to suffer. In the case of an unregulated broker, the risk is 100% on the client’s shoulders. Therefore checking the reference number or the license number of the broker from the financial authority is a great way to know for sure if the broker is indeed regulated or not.
3. How to pick a good binary options broker?
There are many things to consider before choosing a good binary options broker. The first and most important thing is to make sure the broker is regulated. One should not only read some statements on the broker’s website but simply give a phone call or send an email to that financial authority and inquire if the regulation is indeed true. This way, scamming is avoided. The next thing to look for is the infrastructure offered. By this one should look at the trading platform (if it is a web-based one or not), if it offers the possibility of mobile trading, etc. This is important as, in the case of a web-based trading platform, in the case the Internet connection is a slow one at the trader’s end, the platform will run with difficulties.
This will translate into problems to enter a trade at the desired price, so the striking price of an option may differ due to the fact that the Internet connection was slow or the web-based trading platform is difficult to load. Moreover, financial products that are offered is a vital criterion when choosing a binary options broker. Currency pairs are the most popular ones among binary options traders but one should be aware that not all brokers offer all currencies for trading.
While the biggest major currency pairs are offered, some brokers insist on offering more crosses than majors. This is a tricky thing as crosses move differently than majors and if an option is suitable for trading a major, it may not work on a cross as crosses range more than majors. Moving forward, expiration dates are key. A good binary options broker is a broker that offers plenty of expiration dates throughout the trading day, week and month and, ideally, offers the possibility to build your own option. The type of the option is important as well. For example, all brokers offer high/low options, but one touch or boundary are rarely offered and when they are, usually they can be traded only on a few currency pairs and few expiration dates.
4. What is a minimum deposit a broker requires?
Usually, there is no minimum deposit when it comes to binary options trading but this depends on very much from broker to broker. If there is, then that amount is a symbolic one. Some may impose a minimum amount when funding a trading account. However, any amount can be used when trading an option. What brokers do is they offer multiple accounts type and depending on the category, a specific amount should be deposited. For example, accounts may be Micro, Standard or Platinum, and in order to fit into the Platinum category, a bigger amount needs to be funded.
6. What early signs are that a broker might try to scam me?
Customer service is key here. This comes hand in hand with quick assistance in all matters, like funding and withdrawals issues and any kind of other problems might arise. As a rule of thumb, if you find it difficult to get in contact with your broker or the answers are delayed for an unreasonable amount of time, chances are the broker is a scam one. The spread between the option prices may be indicative as well. When trading an option, the broker gives you a price, the so-called striking price, but when the option expires the closing price may differ due to the spread (the difference between the striking price and the closing one). Fake brokers are using this difference in order to make sure an option expires out of the money even with half of a point difference or less.
7. How do I know if a binary broker is a trusted one?
A great way to find this is to simply search the Internet for forums and other people’s opinions and experiences with that broker. This is the best way to find out if the broker is really what it claims to be and if trading with it is suitable for your trading style. For example, there are traders that favor stock indexes or commodities and do not feel comfortable with currency trading. Good brokers also offer binary options trading signals.
If a broker is not offering the desired products to be traded, it should be avoided. Binary trading is all about the expiration dates offered. Brokers are using these expiration dates based on a multitude of factors, things that traders do not understand: daily, weekly and monthly fixings, regular option market expiries that influence flaws, daily rollovers, etc. Expiration dates are intentionally set at these times as volatility surrounding those periods of times is really high so chances that an option that is close to the striking price to lose money are higher.
One way, or the best way to avoid that, is to favor bigger expiration dates in your trading and avoid short-term ones. Patience is key in trading any market, and if someone is willing to pay you a 70% plus premium then waiting a bit for your option to expire is not much to ask.
8. Are the reviews about a binary options broker genuine?
- Normally they should be, but in reality scam, brokers are simply making their own reviews and publish them.
- This is not criteria to choose a broker as well as the funding methods offered: any broker offers now the classical Visa, Mastercard, PayPal or another electronic payment method, so this is not something to differentiate between brokers.
- Again, trying to find out as much as possible about a broker and from as many different sources is very important.
- Unfortunately, the binary options business is associated with many scam brokers so this is a great way to make sure your broker is not one that fits into this category.
9. Should the broker offer a demo account?
Yes. Practicing before trading is mandatory as this way a trader gets familiar with the trading platform, financial products offered, expiration dates, and, in general, with all the broker has to offer. However, not all binary options brokers are offering demo account and some of the ones that do offer them, are limiting them in time. In other words, you cannot have a demo account for an indefinite period of time and this kind of brokers should be avoided. A demo account is very important to know how prices fluctuate during important economic events that are surrounding by higher volatility levels, like the NFP (Non-Farm Payrolls) in the United States or when a central bank is announcing the key interest rate. If prices are stable or not very too much on a demo account, then probabilities favor the same thing is going to happen on a live account as well.
10. Is the information in learning centers valid?
It should be. Nowadays binary options brokers have the interest to teach traders as much as possible about trading. After all, it is in the broker’s interest for a trader to trade as much as possible, so making sure he/she has the knowledge is key. A complete learning center should have both video analysis as well as articles describing the trading concepts and theories available, as well as technical analysis and fundamental factors that influence trading in general and binary options in special. Also, it should approach trading from scratch and gradually increase the difficulty of the subjects covered to intermediate and then advanced levels, to different trading theories and concepts that may be used.
11. Should I trade with a binary options robot if the broker offers it?
This is up to each trader. Binary options robots are the equivalent of Expert Advisors from the forex world and these robots are instructed to buy or sell (in this case to buy a call or put option) if specific things are happening with a currency pair or financial instrument from a technical point of view or if a specific economic news is beating or not the forecasted value. Automated trading is having its advantages and it is a great way to diversify a portfolio. After all, trading is nothing but managing risk above all, so splitting your risk into different strategies/trading techniques (see also our binary options trading strategy article) could only help. However, before trading with a binary options robot, make sure you read and understand the terms and conditions.
12. Are binary options brokers that offer also forex trading more reliable?
Most likely yes. Because binary options trading rose in popularity in the last years, many forex brokers started to get into this business as well. It is recommended to trade with such a broker because, first of all, it already has experience from the forex market, most likely is already regulated, and has a strong customer support in place. On top of this, a trader can always choose to trade forex as well and if that can be done with the same broker, what better incentive to open a trading account exists than this one?
13. Is mobile trading important?
Very. A good binary options broker should offer mobile trading as these days with smartphones running our lives, it is not mandatory to stay in front of a computer anymore to monitor trades. Binary options brokers offer mobile trading platforms or apps and traders can access the trading account for trading purposes, without the trader being obligated to sit in front of a desktop. However, mobile apps are mostly used for trading and not for withdrawing funds. For that, the trader needs to login to the trading account from the broker’s website.