How to avoid Binary Options Scam Brokers

By searching for a reliable Binary Options Broker you will find often scam websites or companies who try to steal the customer’s money. On this website, I will tell you how to avoid a Binary Options Scam Broker and find a trusted platform to trade with. It is important to check the provider by different points before you invest money online.

With more than 8 years of experience in online trading, I know that a lot of traders got scammed by fake or unregulated Binary Options Brokers. Read through this site to be safe when you start your first investment.

What is the point of good regulation?

The licensing of brokers by a regulatory authority and the associated supervision by the latter are intended to ensure that the rights of customers are respected and that their data and funds are well protected. Protection against money laundering and fraud is also an important task for regulators.

However, the standards to which brokers must adhere when they are regulated by a particular supervisory authority are set by them and vary from authority to authority. For this reason, it is important to take a close look at the competent authority. Because even if it is not an absolute guarantee of serious work: if a broker is regulated by an authority that is considered to be very reliable and strict, the broker is then allowed to offer his services and must comply with certain rules.

I only recommend trading with regulated brokers

Andre Witzel, author of day-traders.net

See the list for trusted and regulated Binary Options Brokers:

Broker:

Rating:

Advantages: 

Start trading: 

IQ Option logo
5/5

+ Yield up to 100%
+ Best platform
+ 24/7 support

Deriv logo
4.5/5

+ Yield up to 95%
+ Auto trading (bot)
+ MetaTrader 5

Pocket Option logo
4/5

+ Yield up to 92%
+ Bonus program
+ Accept any clients

Client funds are managed separately

An important standard that is prescribed by all European authorities and also by many non-European regulators is the separate management of client funds. After all, these are the property of the customer and may therefore not be used for other broker’s expenses. The Broker must, therefore, raise funds for advertising, administration costs, or other expenses elsewhere.

Customer deposits shall serve exclusively to provide the required margin for trading. Due to the clear separation of these funds, it is possible in many cases to repay the funds to the customers, even in the event of the Broker’s insolvency. A good regulatory authority also provides support in this case and ensures that the insolvency is handled correctly and that the customers of the insolvent broker receive their money.

Apart from the fact that customer funds are managed separately, it is also important where they are managed. Again, it speaks for the broker if the managing financial institution is a bank of high ranking.

Regulatory authorities look for indications of price manipulation

Monitoring the proper design of trading prices is also one of the tasks of a good regulator. However, this is relatively difficult, especially with the widespread market makers, as in this case, the brokers set the prices themselves and thus, at least legally, act as direct competitors of the client when trading. A reputable provider protects himself against possible loss transactions by using an automated procedure to balance all trades of his customers internally and to place a trade in the opposite direction to the overhanging positions with another provider.

In this way, the broker makes his profit exclusively with the trading fees he receives from the customer. A conflict of interest between Broker and customer no longer exists in this case, as it is irrelevant for the Broker’s profit, whether the customer makes a profit or a loss.

Binary Options pricing

However, by not hedging against losses indirect trading against his customers on the financial market, but by manipulating the prices in such a way that customers lose significantly more money than they gain, a broker can possibly make a significantly higher profit.

To ensure that such fraud is detected and punished accordingly, the strict regulatory authorities closely monitor the price movements of all brokers. If irregularities occur, they are investigated. If a fraud through price manipulation is discovered, a broker is threatened with a heavy fine and immediate withdrawal of his license.

Risk warning on the broker’s website

Warning of the risk involved in trading speculative financial products such as Forex, CFDs, and Binary Options is also one of the provisions that regulators impose on the brokers under their jurisdiction.

For example, it is now standard practice on the websites of online brokers to mention the high risk of loss, which can extend to the loss of the entire deposit.

Binary Options risk warning

Although it is the aim of all brokers to attract customers and earn money with the trading fees, this must not be done under false pretenses. The warning about the high risk of loss with speculative forms of investment is intended to prevent customers from signing up with a broker with false ideas and not being sufficiently informed about the high risk.

With Binary Options you can lose your investment amount.

Andre Witzel, author of day-traders.net

Is this form of investment suitable for the client?

When opening a trading account, most brokers require not only personal details such as name, address, and telephone number but also information on the customer’s financial situation and previous trading experience with financial products. Although it may seem inappropriate to some traders that when registering with an online broker, for example, it must be stated what monthly income is earned and what products have already been traded in the past, this information serves to protect the customer.

This information is mandatory for regulators who work according to EU standards but also other regulators demand it. Potential customers for whom the planned investment in the products on offer obviously does not offer sufficient security and is, therefore, unsuitable are thus not admitted to trading in the first place or are at least advised against trading. At this point, a dubious broker would possibly accept all clients, because every trader ultimately represents a profit for the broker. The strict requirements of the regulatory authority are intended to ensure that profit is not the primary consideration, but also to ensure that traders do not ruin themselves financially by investing in inappropriately inappropriate products.

The broker may ask:

  • Identify documents
  • Identify documents of you adress
  • Information about your financial situation
  • Information about your trading experience
  • Verification of your payment method

Warning against “offshore brokers”

Some of the brokers active in the market are headquartered in remote Caribbean countries and are therefore regulated by the authorities there. Seychelles, a group of islands off the east coast of Africa, is also a popular location for financial services providers. Although the authorities there also impose a number of conditions that must be met by regulated brokers, these are often far less stringent than those imposed by EU or British regulation. The controls are also much less intensive in many cases so that a dubious broker has considerably more opportunities for fraud in the case of “offshore regulation”.

This does not mean that all brokers based in the Caribbean or Africa are automatically dubious. However, we estimate the risk of getting into the wrong broker to be much higher here than with brokers regulated by an authority within Europe. The legal possibilities for traders are also significantly better with EU regulation than with so-called offshore brokers. If a lawsuit is brought against the broker here, it does not have to be brought at the other end of the world, which is hardly possible for traders to implement in practice.

For these reasons, we only recommend brokers that are regulated by particularly reputable authorities and therefore have to undergo strict regular controls.

Brokers in the EU and England

The abbreviation MiFID stands for “Markets in Financial Instruments Directive”. MiFID is an EU directive that aims to improve the transparency of the financial markets and provide good protection for investors. The aim of MiFID is to make it easier for investors to invest in other European countries and thus also with online brokers within the EU. Since the MiFID Directive applies to all European brokers, the provisions of the individual regulatory authorities are also similar. This also makes it easier for investors to keep track of the various requirements.

High requirements should ensure safety

Brokers within the EU are bound by the MiFID Directive and thus also by high-security standards. The providers must, for example, check whether the financial products offered are at all suitable for the client concerned, or whether they represent too high a risk. Financial market transactions must be comprehensively documented so that compliance with the guidelines can be verified at a later date. The advantages that the broker receives from another provider must be disclosed to the customer.

The strict regulations are intended to protect the customer’s capital and prevent fraud.

The individual EU regulatory authorities

There are numerous regulatory authorities in the EU. Which authority regulates a provider depends on the country in which its headquarters are located.

CySEC regulator

Many EU brokers in particular are regulated on the island of Cyprus by the Cyprus Securities and Exchange Commission (CySEC). This is mainly due to the fact that the tax conditions are particularly attractive for financial services companies in Cyprus. Nevertheless, strict EU guidelines also apply here.

Problems can also occur with EU brokers

While EU regulation is of high standards and is intended to provide certainty in Binary Options trading, it does not guarantee that problems will never arise. Unfortunately, it has happened in the past that regulators have had to intervene with European brokers. Although the safeguards usually work relatively well, so that if there are payment problems, customers usually get their money anyway. However, even EU regulation cannot provide 100% protection against fraud or unfair business practices. Traders themselves should therefore always be alert and only invest as much money with a broker as they can spare without major problems.

What to do in case of problems with the broker?

If problems arise during trading, for example, if the broker does not pay out the account balance within a reasonable time, you should first try to clarify the customer service of the provider. If this does not succeed, there are other agencies that can help the trader. Among other things, the consumer centers know what to do in such a case. It is also possible that there are already further complaints against the broker concerned.

However, it is also possible to contact the relevant regulatory authority directly, which can inform the broker of his duties and take further action if necessary. Especially when larger sums are involved, it is advisable to consult a lawyer in case of doubt. With EU brokers, the advantage is that a lawsuit can be brought before a court and thus no lawsuit has to be conducted abroad.

Tips and tricks which can help you:

  • Clarify the problem with the customer support (often it is a verification problem)
  • Only deposit the money you need for trading
  • Withdraw your profits quickly
  • Call the regulation authority
  • Call agencies which can help you to recover funds

The general terms and conditions of brokers

Before registering with a Binary Options Broker, prospective clients should read the provider’s terms and conditions in the full and only register and deposit money once there is no longer any uncertainty about the exact terms and conditions.

Binary Options term and conditions

Be aware of whether the broker is limiting your rights as a trader with certain clauses. In the past, for example, individual brokers often experienced problems with payouts because certain conditions had to be met beforehand.

Only if you have completely read and understood the terms and conditions of a broker and fully agree with them, should registration take place.

Even without the fault of the broker, high losses can occur

Even with reputable online brokers, there is no protection against losses. Although it is highly recommended to pay attention to good regulation. But even if the broker meets all the regulations and works seriously, Binary Options, Forex, and CFDs carry a high risk. It is a highly speculative form of investment, where profits and losses are subject to high fluctuations even with an extensive professional price analysis.

Traders should always be aware of this and consider the money invested as risk capital. A common mistake made by beginners, for example, is to invest too much money in a single position. With good risk management, only a small percentage of the total balance per trade is ever used. Thus, even after several losses in a row, one can still continue according to the chosen strategy.

Traders should also be aware of the margin requirements that many brokers have for Forex and CFDs. Although positions are usually closed automatically and quickly when the required margin is no longer available, in the case of extremely volatile prices, it can happen that this automatic closure can only take place after large price jumps, and the trader loses more money than is in his trading account as a result. In this case, a new deposit is required to balance the negative account balance. In order to avoid this risk, a broker can be deliberately chosen who explicitly excludes the obligation to make additional deposits in his GTCs.

Conclusion: Check the Binary Brokers before you sign up

To avoid a scam you should check the broker with all the information I have shown you on this website. When you are trading Binary Options it can be safe with a trusted broker. Be aware of scam websites or unregulated online platforms.

I recommend the following checklist before you sign up with a Binary Options Broker. So you can be sure not to get scammed by an online broker.

Checklist to be safe:

  • Check the regulation of the Binary Options Broker
  • Check if you are using the right URL
  • Read the terms and conditions
  • Test the broker with a demo account or small amounts of money
  • Test the customer support
  • Verify your account before you deposit money
  • Check out the safety of customer funds
  • Check out reviews by other traders
  • Deposit only the money you need for trading

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