Are you a novice trader who wants to invest your money in binary options? Binary options are relatively new trading methods which require less initial investment. However, novice Binary options traders need to always stick to regulated brokers. We’ve outlined below the safety and security tips everyone should know.
10 March, AtoZForex – Binary options got approved in the United States by the Securities and Exchange Commission and made accessible to retail investors in the year 2008. A lot of beginners are interested in trading binary options, since it requires less market knowledge. The initial trading of binary options began in the US under Chicago Board Options Exchange (CBOE) and American Stock Exchange in June 2008.
First thing every novice binary options traders should know
The first thing novice Binary Options traders should be concerned about is the safety and security of your trading account. You should always choose a regulated and licensed broker. Also, you need to do prior research and understand where your broker will store your funds. You should also ask them about the guarantee they offer. Especially, regarding the safety of all transactions performed in your trading account.
Only regulated brokers will have advanced security features to encrypt all your trading data. They also maintain them in a safe manner. Unlicensed brokers may try to steal your personal and financial information. Additionally, there are possibilities that you could become a victim of identity theft. You should ask about the deposit and withdrawal procedures of your broker. Also, you should ask you broker about the processing time of withdrawals. Many scam brokers will not allow you to withdraw your funds once you deposit money into your trading account. They will try to steal your money.
Is your Binary options broker regulated?
You always need to ensure that you work with a reliable broker. Also, you have to check a broker on regulation, before you open a live account. The majority of binary options brokers are not regulated by CFTC (Commodity and Futures Trading Commission) or SEC (Securities and Exchange Commission).
Most of the brokers have CySEC licenses (Cyprus Securities and Exchange Commission). A trading commission of the EU. Regulation under CySEC does not guarantee investors the same extent of protection of their funds as the SEC or CFTC. Still, CySEC does impose strict rules on brokers. As these Brokers have to adhere to the MiFID rules (Markets in Financial Instruments Directive). A European Union trade law that offers harmonised regulation for investment services across all the EU member countries. MiFID aims at providing consumer protection across all EU states for various investment services including binary options.
How to control if a broker is regulated?
If you are an investor residing in the US, you can make use of BrokerCheck tool by FINRA. You should use this tool to check if a broker is a SEC registrant. Also, you can also use National Futures Association’s Background Affiliation Status Information Center (BASIC). This tool is to verify the registration status of your brokerage firm.
If you are looking for any legal advice regarding binary options brokers and wish to report any frauds, you can seek help from Office of Investor Education and Advocacy of the US Security and Exchange Commission (SEC). Or you can also reach out to Commodity and Futures Trading Commission (CFTC). Considering all the risks with unregulated brokers, it’s advisable to always stick to regulated trading platforms. If you are a beginner, it’s sensible to practice using a demo trading account. Before investing in a real money account.
In Europe most broker have a CySEC license. If your broker says they a CySEC authorisation, you should ask for their 5-digit CySEC license number. Afterwards, you should verify this number on CySEC website to make sure the license is still valid. One example of a still valid broker is anyoption which has the CySEC license number 187/12. The broker is governed by European MiFID regulations. To comply with the latest relugations, anyoption has recently put their their affilitate traffic from France on hold, while also made plans to relocate their Israeli call center.
Why you should be watchful of unregulated brokers?
Another main concern is about automated trading robots. Along with manipulated software to generate false trading signals. In the binary options market, you can find a lot of fake brokers that try to attract beginners by promising unrealistic payouts. They will allure novice Binary Options traders by offering huge joining bonuses. Whilst they also advertise on get-rich-quick schemes. If you come across any binary options broker that promises to turn you a millionaire overnight, you should stay away from such brokers.
When you join such brokers, they will initially talk in a very convincing manner. Their aim is to ask you to deposit all your money. They will offer a huge joining bonus and promise higher payouts compared to other brokers. However, in some cases we have learned that traders opened a trading account with them, but then were unable to withdraw a single penny from their accounts.
How to spot unregulated brokers?
Novice Binary Options traders can search for the list blacklisted binary options brokers online. You should avoid opening an account with these unregulated brokers. Also avoid brokers that promotes get-rich-quick schemes or automated robots. Such brokers use fraudulent software which will keep generating losing trades for you. They promote the use of automated trading robots which generate false signals based on incorrect market data. Hence this data can result in losing trade positions.
You should also read the terms and conditions on your broker’s website thoroughly. Always look for any hidden charges or commissions. Many unlicensed brokers will charge you with commissions for every trade executed using their trading platform. Also, novice Binary Options traders should read the testimonials. Taking it a step further, you should ask for reviews from existing customers. The ones who already have an account with the broker.
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