This is going to be stressed over and over again on this site since it’s just that important. One of the biggest and most important decisions you will need to make if you plan on trading binary options is which broker you are going to trade with. There are a staggering amount of brokers out there, some great, some terrible. Some could actually even be considered to be downright fraudulent, meaning that the moment you deposit your hard earned cash with them, you can kiss your money goodbye.
The binary options broker provides you with the means to actually trade the options. The quality of the software involved is important as it should have zero tolerance for mistakes. All the quotes or graphs should be as accurate as possible, no matter what the status of your option is. Now, keep in mind that when purchasing a binary option, you are not actually participating in the market, but rather predicting the movement of the asset in question. Should you win the trade, the payout will come from your broker. Some of the more trusting brokers compensate for these “losses” to them by hedging options made by different traders against each other. There have however been reports of binary options brokers that slightly skew actual results upon expiration so as to tilt the option in their favor so they don’t have to pay the winning expiration reward. These brokers should be avoided at all cost and we request that if this ever happens to you, please report it to us so that we can publish it here.
So, what should you look for when assessing a binary options trading platform? We’ll go over some of the key points you should look out for when testing a platform. These criteria are actually more or less the same that I use when reviewing brokers and publishing here.
- Software stability and accuracy
- Software features and ease of use
- Profitability (payout)
- Withdrawal policies
Some brokers have taken the time and money to develop and fine-tune their own trading platforms, making sure that they are secure, accurate, and easy to use. Many other smaller brokers, which cannot afford to develop these platforms themselves, simply license the platforms from the larger companies, tweaking them a bit and spicing them up with a few of their own quirks. The biggest and most popular of these platforms are provided by Spotoption, Tradeologic and Tech Financials.
This is the single most important factor when choosing a broker. I’d rather trade on a crappy platform where I know I’ll be able to withdraw my winnings that on an ultra cool platform with a broker that refuses withdrawals and makes excuses all this time, or in extreme cases simply does not respond. Binary options regulations are relatively in their infancies, with only a handful expecting to receive CySEC regulation soon, and even less currently holding approval.
However, because being regulated is not an obligation, but rather something the broker needs to voluntarily opt-in for, this means that dishonest brokers can still do business even without regulation.
There are two important factors in assessing if a broker is trustworthy or not:
- Brokers reviews: Experienced traders have experience with a lot of brokers, and have either physically traded with them or at least heard good or bad stories. The community is a small one and word travels fast. To get an idea, feel free to check out our binary options broker reviews, and if still in doubt, just post a question on our binary options forum.
- Regulation: A trusted broker will always have nothing to hide from the regulatory bodies. Mind you it does cost a lot of money to achieve regulation, but good brokers will be willing to spend this money to prove that they can be trusted. Always check if the broker you are going to be trading with is either fully regulated, or currently awaiting approval. If the broker isn’t even trying to get regulated, this should be a big red flag for any trader.
Software stability and accuracy
Binary options trading can often require fast decision making in order to enter trades that have good entry points. This is why it is critical to work with a broker that offers both a fast and a stable trading environment. Slightly slow or inaccurate platforms can be the difference between an option expiring in or out of the money, which could be the difference between winning or losing hundreds if not thousands of dollars.
Not only should the quotes be accurate, but the brokers should also offer minimal slippage when placing an order. Slippage is the effect caused due to the lag between the time you want to initiate your order and your order being processed and accepted.For example, let’s say you want to put in a call order for a binary option at $11.50. If you need to wait a few seconds to get the order accepted and the stock moves in this time, your call order may eventually be put in at a higher amount – let’s say $11.70. Now, if the stock lands at $11.60 upon expiration, you would be out of the money simply because the slippage caused your strike price to be higher than it should have been.
Software features and ease of use
Depending on what kind of trader you are, you’ll have different preferences from your broker. There aren’t that many trading platforms around, but there still can be significant differences between them. For example, some platforms display a number of colorful asset graphs on the main trading page, while others prefer to show you a list of all the tradeable assets along with what their respective payouts are. Some even let you choose between different display methods.
Each has its own advantage and of course disadvantage when trading binaries. They also offer different features and types of options. In terms of software, you’ll want to trade with something that is easy to navigate and is fast. Almost all binary options brokers offer web-based platforms which by nature won’t be as fast as live streaming software, but it is fast enough.
Binary options trading is all about one thing: making money. These options offer fixed gains if you succeed in expiring your option “in the money”. Different brokers offer different payouts, depending on their own calculations and how they hedge the winnings. These can be anywhere from 70% up to 95% (or up to 600% for high risk options). Obviously, you’ll want to work with a broker that can give you consistent high payouts for successful trades. Typically if your option expires out of the money, you lose your entire investment on that trade. However, some brokers offer as an up to 15% rebate even on unsuccessful trades. Here at OnlineOptionsTrading, when we review a broker, we usually present the normalized payout, which is the effective Profit + Rebate.
Being as the reason you’re trading binaries is to make money, you’ll want to make sure that you can withdraw your profits easily from your broker. You could make millions of dollars trading binary options. However, all that money wouldn’t be worth a thing if your broker didn’t let you withdraw. Be sure that you broker doesn’t have any hidden clauses that could make withdrawing your winnings a complete nightmare. Here are a few very important things to keep in mind when registering:
- It’s usually easier and faster to withdraw using the form of payment that you used to deposit.
- If you opt in for a deposit bonus, it will ALWAYS come with strings attached, like a x20 to x50 trading volume requirement. If the account manager doesn’t tell you this upfront, ASK. One of the biggest complaints about binary brokers comes from traders who take bonuses and then don’t understand why they cannot withdraw their funds afterwards
- As soon as you make your deposits, ask which documents you will be required to submit in order to withdraw. Then submit all of these documents as soon as possible. This will make it much easier to withdraw when the time comes later. These documents are usually required by the brokers in order to comply with anti-money laundering regulations, so they need to make sure they have proof of who they are sending the money to.
- Read up on your broker’s track record for withdrawals in order to get a feel if there should be any problems when the time comes. When in doubt, start looking for another broker.
Customer support – As with everything in real life, there will always be glitches and small problems that need to be resolved. No matter which broker you’re using, there will always be a time when you will need the help of customer support. Binary options brokers are not measured only on the sales support before you start trading with them, but also on customer service after you’ve already signed up and become one of their customers. A good binary options broker will have customers from all over the world and will need to have staff available at least 24/5 in order to give quick assistance to any problems that may occur, be it via email, chat or even telephone.
There are many binary options brokers out there, but only a handful are really worthwhile and genuine. We have made a short summary list of these brokers for you here at Onlineoptionstrading, with the best and most trustworthy brokers currently being 24option and Stockpair. Feel free to read their reviews and add your comments on our forum.