With a working computer and a good Internet connection, almost anybody can become a binary options trader. Yet, without a good binary options broker, your efforts at becoming a successful
trader can be easily stymied. Unlike in the recent past when only a handful of brokers were available in the market, the binary options space has rapidly expanded and now boasts hundreds of
brokers. Unfortunately this means that choosing a reliable one can be a pretty daunting task, especially for an inexperienced trader. Each broker comes with their unique set of features, some
of which might be a good fit with your trading style while others might not.
Here are a few criteria to consider when hunting for a good binary options broker:
The minimum deposit demanded by the broker is one of the most important considerations you should make. Although trading binary options in general requires considerably less capital than buying stocks, the difference between the minimum deposit and minimum trade amount between one broker and another can be considerable. Minimum deposits by U.S. brokers range from $10 all the way to $250 while the minimum trade amount is $1-$25. The maximum trade amount is somewhere in the range of $1,000-$20,000. The most important thing to consider is your trading needs and preferences. In general, the higher the financial investment per trade, the higher the class of the trading account.
In general, most brokers provide the popular currency pairs, stocks and indices, and commodities. However, if you have a preference for a certain asset(s), check whether the broker platform
offers the asset. A simple check on the broker's website is usually enough to let you know which assets are available for traders.
It's also important to check which trade types are offered by the broker. Nearly all brokerages offer the classical PUT/CALL option. Other trade types include One-Touch, Boundary/Range Trading, and High-Yield Options. The best trade type for you depends on your strategy and your timeframe.
The topic of regulation is very important for any binary options broker because of the speed at which the binary options industry is growing. With tens of new brokers popping up every week, the
majority of brokers are unregulated. Although regulation does not completely guarantee the safety of your funds, having a regulatory framework that governs your broker ensures that the broker
is mandated to act in the best interest of the trader. It also ensures that the brokerage firm is well capitalized and is therefore unlikely to suffer from major liquidity issues including
being unable to honor their obligations to their clients. Binary options brokers in the U.S. are now required by law to have a minimum of $20 million in capitalization.
In the United States, binary options brokers are regulated by the Financial Industry Regulatory Authority (FINRA), a self-regulatory organization jointly formed by the brokerage industry and SEC (Securities and Exchange Commission). Brokerage firms that are based in the U.K. are regulated by FSA (Financial Services Authority). A good number of brokers outside the U.S. are regulated by CySEC which is based in Cyprus. A CySEC license is accepted by all members of the EU (European Union). Unfortunately, no CySEC-regulated brokers can accept traders residing in the U.S.
The payout is defined as the ratio of profit paid out by the broker to the trader compared to the amount invested in the trade. For this reason, the payout is expressed as a percentage.
Different brokers have different ways of setting the payout: some calculate the return based on current market price while others use their own proprietary algorithms. Whichever method the
broker uses, a return in the range of 65%-70% is considered satisfactory. PUT/CALL options usually offer 65%-85% returns while One-Touch options can exceed 500%. The general principle is that
chances of finishing in the money become lower as the returns increase.
It's also important to check the speed of withdrawals since some brokerages are very slow to payout customer funds or refunds. Usually the best way to do this is by starting trading with a small amount and checking how fast the broker dispenses your winnings.
If you are a bit risk-averse, check whether the broker offers loss coverage in the event of bad trades. Some brokers return 15% of your investment when your trades are unsuccessful, but in return require you to accept a lower payout.
The type of customer service offered by the broker is another important consideration. Ideally, you should be able to reach the customer service desk as fast as possible. Check whether the broker can be reached in real-time via telephone or live-chat. Send an email to the broker to test how fast they respond. Call or chat with them and ask about their account types and their withdrawal times. The customer service offered by the broker is frequently a reliable indicator of how much they value their clients.