How do you actually choose a binary options broker? With over 250 binary option brokers and binary option trading platforms available worldwide one would really wouldn’t know where to start. In this ‘how to choose a binary options broker’ article I am going to explain how you actually choose the one that is the best for you.
One of the most important things when choosing a binary options broker is checking whether the binary option broker is regulated or not. Note that most binary option brokers aren’t regulated at all, which basically means they can treat any binary options trader as a casino player: take their losses when they lose and never payout winnings or profits when they win.
Guess what, this actually happens a lot with unregulated binary brokers and the internet is full of complaints by binary option traders who made significant profits but were never able to cash out or withdraw their profits. The brokers simply close the binary option trading account, remove any winnings generated with bonus money and what have you. These bad practices by scam brokers hurt the entire binary option trading industry and this is why there are unlike just choosebroker.com many other websites are dedicated in debunking money making myths from scam brokers and trying to promote and defend the good ones. Be sure to read my Scam Brokers List and Binary Option Scam Log.
I am a binary options trader myself and I live a great life and I wish any other binary options trader or person new to binary option trading the same. As website owner of choosebroker.com it would be easy for me to just promote all binary option brokers as they pay me a fee for writing a positive review but as I like to be honest and well mannered, I only enlist those on the website that are considered to be trustworthy (that’s why some get removed from time to time).
There are many types different regulatory bodies for binary option brokers with CySEC, the Cypress Security Exchange Commission being the most famous and easy to obtain one. Then there’s the FCA (Financial Conduct Authority) and FSA (Financial Service Authority) in the United Kingdom, the AFM, Autoritet Financiële Markten in The Netherlands and many more. These ones are basically a bit more difficult to get and binary option brokers that are regulated and licensed by one or multiple of these should immediately be considered more reliable than CySEC ones. Some binary option brokers are MiFID compliant, which means they are inspected and have to file reports monthly, which is even better as they cannot choose to hit-and-run on their customers just before the yearly report. So, whenever you choose a binary options broker, at least choose one which is regulated and has a decent license.
The easiest way to check whether a binary options broker has a license or is regulated is by going to their website, and scrolling all the way down. Under their risk disclaimer and Terms and Conditions you will find license and regulatory information. You could also just check our broker review pages where under ‘broker details’ you will find wether the binary options broker is regulated and licensed or not.
Now, the next thing to look at is of course, the binary option broker’s payout percentages and ratios. Let me tell you a secret: on standard binary options, vanilla options, classic options, high/low options or whatever you want to call them, the average payout should be at least 80% upwards. This is because even with correct market prediction there would be (and poker players would know this) to much variance otherwise and trading binary options wouldn’t be profitable in the first place.
Some binary option brokers payout below 80% but have 5% to 15% cashback or rebate deals when you predict wrong and thus lose your investment. Calculate the average payout percentage and add the rebate percentage to see if the binary options broker pays out within industry standards. If these two numbers added up do not exceed 80, forget the broker, it’s that simple.
Don’t fool yourself with payouts of 500% to 1250% offered on some binary option broker websites, these are true but are on One Touch and Ladder Options which require a far more precise prediction to succeed and net a winning trade and to get paid out than just predicting higher or lower. Always remember: if something sounds to good to be true, it most probably is. I will explain all about one touch and ladder binary option types later in this article.
Another important aspect of a good and reliable binary options broker is it’s minimum investment required per binary option. Whilst for some of us it wouldn’t make any sense wagering below the industry standard of $25 per binary option money wise, think of the fact that you could implement way more binary option trading strategies with just a $10, $5 or even a $1 minimal investment per option requirement.
If one, for instance would trade binary options using the 1-3-2-6 strategy, that would cost a minimum of $300 on a binary options trading platform that requires you to invest a minimum of $25 per option and just $12 on a binary options platform with just a $1 minimum investment requirement per option. For people new to binary option trading I would suggest to take a look at iq option, where the minimum initial deposit required is just $10 and minimum investment amount per option required just a single dollar.
The next thing I want to talk about is binary option deposit bonuses offered by binary option brokers. Many people new to binary options trading get suckered in with this bonus scheme similar to online casino’s. What basically happens is that a binary option broker would offer a 100% bonus on initial deposit which obviously sounds superb. ‘’If I deposit a hundred bucks, I start with 200 bucks on my account, free hundred bucks’’.
Think again, no one would like to give away free money and these big financial companies that offer binary options in the first place are the last people on earth handing out ‘free money’. In this case, just like some scrupulous online casino, not only your received bonus money, but also your own initial investment or deposited amount, will be ‘entangled’ and you will not be able to withdraw anything until you made a turnover or ‘wagered’ your received bonus amount let’s say 20 to 30 times. it’s way safer to choose a binary options broker that maybe offers a small 10-20% bonus on your first deposit with easy terms, some risk-free trades or just no bonus at all.
Recently binary option bonuses got banned in most countries. Read all about the binary bonus ban here.
Then we come to trading methods and risk management features. Whilst many binary option brokers just offer two simple buttons buy and sell, the better ones offer extra ways of binary options trading. I would like to start with a small explanation of all the trading methods you can possibly find on binary options broker and what they do. The most popular and most featured ones are:
– Double Up
– Extend (Buy me Time) , (Roll Over)
– Early Sell (Buy me Out)
– The Flip
– Rebate drag bar
Double up speaks for itself and is basically a feature that enables you to double up the investment amount of an option whilst trading and not having reached it’s expiry time yet. This double up comes of course with a penalty in payout percentage. Extend, also called Buy me Time or Roll Over is a feature to extend the expiry time of an option, this giving you more chance to land on a value higher or lower than you predicted and this succeeding in a winning trade.
Also this feature comes with a payout percentage penalty. When you are currently predicting the right trend with a binary option but it hasn’t reached it’s expiry time yet, you can already close it with this feature, again at a payout percentage penalty.
The Flip or ‘turn around’ is a feature only offered by several binary option brokers and allows you to switch call to put or buy to sell on a binary option that hasn’t expired yet. All these binary option trading methods increase risk-management possibilities and a good binary option broker should have as many of these features as possible.
The rebate drag bar or cashback percentage drag bar is a binary options trading method offered by just a handful of binary option brokers and according to me, the most important risk-management tool whilst binary options trading. This bar you can drag enables you to get a percentage of your investment on a single binary option back if you predict the wrong way or value at expiry time.
Let’s say normally a binary option on EUR/USD pays out 82% if you’re right and you lose your full investment if you’re wrong. By dragging this bar a tiny bit to the right, let’s say to 5%, it means that if your prediction is wrong, you will receive 5% of your investment back in the form of cashback or a rebate, as a result, if your prediction is correct, you only get paid out 78% profit, as you traded that 5% for a cashback or rebate hedge. iq option is the binary options broker that enabled binary option traders to drag this bar al the way up to 45% which is ideal if you are happy with any profit and you don’t like risky trading at all.
Whilst some of us like to stick with classic, vanilla or basic binary option trading and enjoy the payout percentages it nets them, some of us like to make a little bit more profit or take a little gamble on the stock markets once in a while.
There are quite a few different binary option types available with way higher payout percentages than normal binary options, but they also require a more precise prediction. Examples of binary option types are:
– One Touch/No Touch options
– Ladder options
– Pair options
– Boundary options (Range options)
– Option Builder
The first type of special binary options called one touch or no touch options are binary options where you don’t only have to predict higher or lower but the exact value the asset is going to be at moment of expiry. Although, this is of course a little bit more difficult, payouts go as high as 680%.
Ladder options are basically a serie of binary options where you have to predict the right way (higher/lower) multiple times in a row to get bigger and bigger payouts. The highest payout on ladder options I have seen in my life is a massive 1250%.
Pair options are similar to binary options but instead of predicting if a single asset will go up or down you now select two assets and predict which one is going to perform better. Payouts on pair options are similar and the same height as regular binary options.
Boundary options or range options as they are sometimes called are similar to one touch/ no touch options. You predict a certain range of values the asset is going to be worth at the moment of expiry and you get paid out when your prediction is correct. Range options or Boundary options payout around 250%, which is obviously a value between regular binary options and one touch/ no touch options.
The Option Builder is a special binary options trading feature offered mainly on binary option brokers that run on SpotOption software. With the Option Builder binary option traders can ‘’build’’ their own option, choosing expiry time, payout percentage and conditions. Depending on how risk aversive you are, you might want to choose a binary option broker that offers as many of these binary option trading features as possible.
Binary options trading software is not to be overlooked! Whilst many binary option traders get overwhelmed by the beautiful websites and landing pages designed by binary option brokers, its the actual binary option trading software that counts in the end. Most binary option brokers use either SpotOption or TradoLogic as software and both softwares are very user friendly, easy to understand and available on smartphones and tablets. Order execution speed is one of the factors that is the most important. You don’t want any delays or lags when you buy or sell an option and every trading platform and binary option broker should work at the speed of light. You don’t want any pop-ups or distracting market information in the middle of your screen either. The one-click order execution is perfect for experienced binary option traders that already know what they want to buy or sell when they click on an asset.
Last but not least, especially for beginning binary option traders and people new to binary option trading in general, you would like your broker to provide you with some trading signals and strategies. Binary option trading signals are ‘tips’ on particular asset trend moves that are most likely to happen. These trading signals almost always come with a reliability meter where traders can see how big the chance is the trading signal is going to true. iq option is one of the binary option brokers that give you these signals under a special tab with clear graphs and trend movement display. At some binary option brokers traders get a appointed to a personal account manager who evaluates trade history and money management with you, this is a huge plus for both beginning and experienced traders.
So, to sum it all up, a good binary options broker is regulated, offers high payouts on standard binary options, has several types of options and trading methods available, runs on a good, reliable software and provides educational material and trading tips.
I hope you enjoyed this ‘How to choose a binary options broker’ article and I invite you to leave your email adres so you will receive more of these quality articles by email. I wish you a pleasant binary options trading experience at one of the binary brokers enlisted under the binary option brokers section on this website.
If you don’t know which binary option broker to choose you can either contact me via live chat or by email or take a look at iq option, which after more than 50 binary option brokers reviewed, I think is the most suitable for beginning binary option traders and people new to binary option trading in general.