The access point into the binary options market is through a broker. The business of the broker is to hold the trader’s funds in trust and provide the platform on which the trader can trade binary options. If profits are made, it is the business of the broker to keep these in trust as well until whenever the trader decides to withdraw the profits or all his money. When the trader makes this decision and sends the instruction to the broker, the broker is obligated to return such money to the trader.
Most times, the broker will be located in a different geographical setting from the trader, and so the issue of trust comes up readily. This is why it is very important to select a good broker so that there are no issues with the entire process. Unfortunately, the financial trading market place is filled with many scam brokers whose primary aim is to stiff traders of their hard-earned money.
Sometimes, it is not always about selecting a broker that scores high marks for the parameters that we will discuss below, but also about selecting a broker whose package will satisfy the cravings of the trader. For instance, a trader may not care much about customer service but may prefer to use a broker that can provide trading in up to 90 asset types. Another trader may not mind just 10 asset types in so far as the broker is always at hand to answer any questions he may have. Sometimes, it all boils down to individualized choices. Brokers realize this and that is why as they move along in their business, they carry out occasional surveys to get answers from traders in order to know where to make adjustments.
Steps to choosing the right broker for your needs:
Regulation
One of the problems that we are seeing in the binary options market place is the issue of regulation of brokers. Majority of brokers in this arena are located outside the US. Regulation in the US is an assured thing. One of the few brokers operating in the US is Nadex, and they are regulated by the Commodities and Futures Trading Commission (CFTC). This fact is stated without ambiguity on their site and the CFTC provides an avenue to cross check this fact from the CFTC webpage. With brokers outside the US and UK, there is a lot of ambiguity when it comes to issues bordering on regulation. Many brokers claim to be located in Cyprus where regulation is covered by the Cyprus Securities and Exchange Commission (CySEC), but closer inspection reveals that such Cyprus operations are administrative offices at best. The corporate headquarters of most of these brokers are either in the Virgin Islands or in locations where regulation is weak. CySEC seems to have become aware of this problem, as they recently announced that they would be re-certifying binary options brokers in Cyprus and assigning them specific licensing for binary options operations. So if you make the choice to choose a broker and such a broker is located in Cyprus, found out if they have been assigned the new binary options licenses. Otherwise, you are better off using brokers located in the US, UK and other European countries where banks are the institutions managing brokerage business in the binary options arena.
Ease of Transactions
Long gone are the days when the only means of transacting on a binary options platform was via the exclusive use of bank wires. There are now options to use credit/debit cards as well as other electronic payment e-wallets such as Skrill and CashU. Skrill is one of the best methods of transacting with a binary options broker because this payment solutions provider gives a trader access to several other payment options. Skrill integrates several payment solutions and puts them all in one place. So for today’s traders who want fast deposits and fast withdrawals, it is possible to actually get a broker who will provide such flexibility as opposed to boxing you into a box with just one payment option.
Transparency of the Trading Process
Unfortunately, there is no way of knowing if a broker provides transparent trading conditions before you actually get into the trade. Even when a broker provides a demo account (which in the binary options market is the exception rather than the norm), there is still no way of fully gauging what the trading conditions are. The only way of truly finding out is by visiting online binary options review pages. Now we are not talking about the promotional review pages, but online forums which are independent and accept views of traders without restrictions. This is where the true picture of the trading conditions of several brokers is exposed for the world to see.
What are the common issues with transparency when it comes to the trading process?
- Price of assets suddenly changing so that bets become more expensive. This is akin to the phenomenon of slippage in forex.
- Assets suddenly becoming non-available for trading at a time when there is increased volatility and a better chance of a bet being won.
- 60 second bets which get tipped into negative territory when at breakeven point with one second to go.
When dealing with binary options brokers who are market makers, there is really no way to avoid these issues. When dealing with a Level II broker such as a major bank, traders do get better deals but using these services are more expensive in terms of account opening capital and commissions to be paid. So for traders, it is all about getting a broker that will enable you strike a fine balance between the two extremes.
Cost of Operations
For traders, it may just come down to a choice between using:
- A high-end broker such as a major bank which charges more money in commissions and requires at least $10,000 in account trading capital, but which provides the most ideal trading conditions such as transparent pricing.
- Choosing a lower end broker with a market maker model. Cheaper to use, requires lower capital but may not deliver the best in terms of transparent pricing.
If a trader does not have up to $10,000 to trade, then his choices are restricted and he may have to settle for the best of the market maker brokers.
Choice of Contract Types
Sometimes, it may boil down to the skill of the trader. A trader may be proficient in one trade type but not in another trade type. In this instance, the trader will have to look for a broker that offers the trade contracts that he is proficient in. For instance, if a trader is very good at making money from the 60 second options, but chooses a broker that does not offer this contract specification, that trader has already limited whatever chances exist to make a profitable career out of trading. So traders should choose brokers that can give them what they want in terms of trade types.
Customer Satisfaction
How many of us would like to use brokers who take forever to respond to issues that pertain to the trading process, knowing that unanswered requests will hamper the ability to trade profitably? We all like to have our issues attended to as fast as possible. Some brokers are notorious for their bad and unresponsive customer service. Every trader who desires good service will do well to search review sites for information about the brokers with the best customer service possible.
Customer service doesn’t just stop at the broker answering questions that a trader may have. Does the broker ask traders to participate in occasional surveys? Brokers that request for surveys are brokers that are interested in improving their services for the benefits of traders. Some brokers just cannot be bothered. So when choosing a broker based on customer service, choose one which has time to talk to its clients.
Now these are the parameters that trader should use when looking for a binary options broker to use. These options do not make up an exhaustive list, but cover the key areas that pertain to trader satisfaction. Now it is impossible to get a broker who will satisfy all traders to their satisfaction. So it is actually a choice between selecting a broker that will get it right in at least three of the five parameters, or can do appreciably well in all the parameters. This sounds like a lot of work and it is but you absolutely have to do your own research. At BinaryBrokers24 you can find all the information you need choosing the best binary options broker. You can find reviews about a lot of financial institutions and a lot of tips about the market.