Binary options are legitimate and potentially-lucrative investments, and some brokers and platforms have been established under the supervision and accountability of governmental regulatory authorities. However, there are also quite a few platforms that exist beyond the scope of governmental regulation. Unfortunately, there are many stories of investors who have been scammed out of their money because they chose to participate in markets created by fraudsters. The best way to minimize risk is to carefully select and participate in markets that have a reputation for being honest while providing a platform that is not skewed to favor the brokerage.
A Solid Foundation
The basis for binary options trading depends on accurate market prices in order to establish the value of an asset or index at a particular point in time. Therefore, the ticker must reflect what is actually happening in the real world. A regulated trading platform will import data in real-time from actual world markets and financial institutions. On the other hand, unregulated platforms or brokers may have the capacity to incorporate algorithms that are designed to skew these results in their favor. Since the basis for determining whether or not an option contract meets the stipulated criteria rests on these figures, even the slightest modification can alter the outcome and cause the investor to lose money.
Aside from manipulating software to favor the brokerage, investors are at a disadvantage if they are charged commissions based on the value of their trades. If a brokerage assesses fees on the total amount of money in the contract, it is not in their best interest to give investors a level playing field. Good brokerages will always take a fixed-rate commission irrespective of the value of a contract. This eliminates the opportunity and temptation to alter software to favor the brokerage because their interest lies solely on profiting from trade volume.
Avoid Promises of Success and Wealth
Regulated brokerages will not entice potential and current traders with get-rich-quick promises or other grandiose secrets to success. They may offer a range of educational resources, features and competitive commissions or fees in order to attract traders. However, investors who participate in markets that are built and maintained by sales pitches and gimmicks stand the chance of being taken for a ride.
There are no guarantees to profiting from binary options inasmuch as being successful with any other type investment or trading strategy. Success depends on a lot of factors that include market knowledge, experience, calculating risk and instinct. Each investor has their own preferences and “system” that they rely on to make decisions. The purpose of the market or trading platform is not to influence investors and how they execute trades. They are there to provide a stable and reliable environment in which participants can conduct business.
Take Small Steps and Evaluate the Platform
Don’t sink all of your money into a new market, brokerage or platform until you have evaluated results for yourself. Make a series of small trades and consider comparing a few markets before settling on one over another. While good brokerages are regulated in one form or another, the vast majority are based in Europe. Different laws apply that govern brokerages, and the rights of investors can vary from country to country. It may be very difficult, if not impossible, for American investors to file complaints or take legal action to recover damages that stem from suspected fraudulent activity.
Binary options are legitimate and used by traders around the world as an alternative form of investing. There are many good markets to join, and this is evident simply because they exist and are used by investors every day. However, it is up to the investor to take the time to explore different options before making any final decisions. The best way to minimize risk is to thoroughly examine the aspects of a brokerage or platform first-hand in order to avoid some of the pitfalls that have cost others a lot of money over the course of time.