Can you imagine an option trade scenario where millions of traders congregate in one spot to trade forex, stocks or binary options contracts? Such an option trade or investment atmosphere would be such a logistic nightmare. This is what led to the emergence of the concept of broker services; going through an identified and registered agent acceptable to all market participants in order to trade digital option assets like stocks under standardized market conditions.
The choice of a fixed return option dealing firm to trade forex, stocks or binary options trading is not something to be taken lightly, given that the firm you choose will hold your funds in trust, and is expected to execute option trades for you, provide you with a functioning digital option trading platform and remit your profits when you want to withdraw them.
What then should make up the broker for binary options trading checklist?
What is the regulatory status of the dealing firm?
This should be the number one item on the list, but it is rather surprising how traders who should be very concerned about whether the dealing firm they want to give their hard earned money is a registered and regulated firm or a husband and wife kitchen operation, simply decide to overlook this aspect. They get sucked in by the glamorous sales pages, unbelievable bonuses and promos, and never stop to ask about the story behind it all. The forex market has historically been laden with horror stories about fraudulent dealers, and this is now an emerging problem. The following questions bordering on regulation should immediately come to mind:
- Where is the fixed return option broker located? Is their registered office actually an office which is traceable, or simply a basement under a decrepit apartment?
- Is the digital option firm registered with a regulatory authority?
- Is there even a regulatory authority in the first place? You will be surprised at how many brokers there are in the market located in regions where there is absolutely no regulation.
Regulation ensures the following:
- That the forex or binary options dealing firm is certified to be genuine and in sound financial health by an independent agency with legal empowerment of enforcement by the government of that country.
- That any infractions by the binary options firm will be punished accordingly and traders will get redress where necessary.
- That those who own and work in a binary options dealing business are fit in character and knowledge to hold funds for traders in trust.
Use only regulated dealers as this is the only way to ensure that funds used for trading are protected.
It is becoming increasingly obvious that not everything that occurs in a dealer’s platform is deemed to constitute an infraction, and will therefore escape action from the regulatory authorities. For instance, at a time a news release hits the markets and a great percentage of trading positions get into a price direction, it may become difficult for a dealer to match the orders and payouts without the risk of suffering significant loss. In such instances, dealing houses would rather risk losing commissions by freezing platforms and preventing trading in some assets to maintain a balance. This occurs on almost every trade platform because the binary options market does not have as much depth as the forex market so brokers will naturally take action when there aren’t enough orders in one direction to offset large volume of investments in the other direction.
The problem comes up when the freezing of assets to prevent trading becomes consistent. This prevents traders from achieving their objectives and reduces their ability to make profit. If you are a victim, you need to review your status and change to binary options brokers where this occurs on a minimal basis.
If a dealer, be it in forex or fixed odds, has stipulated on their website that withdrawals on profitable investments will be processed within 24 hours, it should be able to keep to this time frame. In the recent past, there have been brokers who have consistently failed to honour withdrawal requests time after time. A popular trade review site gave an instance of a dealing broker that held back traders’ funds without cause. Examples of such brokers abound and binary options review sites and online trade review forums will give a detailed account of such errant brokers.
In the final analysis, trading is only one aspect of the entire equation: taking the time to select good digital option brokers is another aspect of the entire process.