What to Look for In Binary Options Brokers

Word cloud illustration related to binary option growth.

Word cloud illustration related to binary option growth.Binary options trading is becoming increasingly popular with new investors, but it is hard for people who are not experienced to know what to look for in binary options brokers. How can you tell whether a broker is reputable, especially in a marketplace as large and international as that of binary options?

The evolution of the binary options market is going in a similar way to the evolution of the forex market. Binary options have only been around for about seven years. The SEC approved this form of trading back in 2008, however, that is not long in the financial world.

When you are shopping for binary options brokers, there are several things that you should look at. The things that people focus on first are the type of broker and the trading platform that they use and these are certainly useful things to pay attention to. But what really matters in terms of the safety of your account and the protection of the money that you invest is the quality of the customer service, the regulator that the company operates under and the company’s capitalization.

Most American brokers are self-regulated under the Financial Industry Regulatory Authority, as well as the Securities and Exchange Commission. There are other regulators for brokers in the UK and the EU, and this can be quite a minefield for people to consider. A huge number of companies in the Binary Options space are either unregulated or are regulated by Cysec, which is a Cyprus based authority. If you are concerned about regulators, look for a broker that is based in your home country and regulated by that country’s body.

Capitalization is another important thing to consider. A good broker should be well capitalized so that there is very little risk of you losing all of your money if the broker goes bankrupt. A company that is regulated is more than likely well capitalized because the majority of regulators require brokers to have a large amount of capitalization (in the realm of $20 million) before they can operate. You can check the capitalization of brokers that are registered with the NFA and the CFTC on the CFTC website. This will give you the peace of mind that the broker that you are considering using has sufficient funds to back up any winning trades.

Customer service is something that is harder to judge objectively. Ideally, you should look for a company that provides multiple ways to contact them, including publishing a phone number and a registered, valid company address. You can look at reviews online to find out how responsive their customer service is. In addition, look at their FAQ, Knowledge Base and support pages to see if it is comprehensive and contains useful information. This will make it easier to make an informed decision about whether to use that firm.

The choice of trading platform is a subjective one but in general, a company using one of the industry standard platforms is a good sign.

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