New traders often find it difficult to distinguish legitimate brokers from a binary options scam. By asking these four questions, you can make the decision easy.
- Which security measures does a broker use to exclude criminals from their customer base?
- Does the broker offer high enough payouts for you to make money?
- Is some institution controlling the broker, making sure that there it doesn’t scam you?
- What experience did other brokers and partners of the broker have?
To help you understand the meaning behind those questions, let’s look at each of them individually.
How to recognize a binary options scam
Which security measures does a broker use to exclude criminals from their customer base?
Binary options brokers are internet business, and over the internet, you are unable to know who you are dealing with. For criminals, this is the ideal environment to launder money, allowing to turn money they stole into clean money without leaving a trace.
Binary options scams are indifferent about dealing with crooks – they are crooks themselves and don’t mind dealing with people like themselves as long as they make money. Legitimate binary options brokers, however, will try to prevent these illegal dealings.
Legitimate brokers employ some sort of validation process, forcing their customers to identify their identity clearly. Most commonly, brokers ask you to send in a picture of your ID and a proof of residence and, if you are using a credit card for payments/withdrawals, a picture of the credit card.
This process keeps brokers and your money safe, but it also adds costs for the broker, which has to employ people to control the documents. Therefore, only legitimate brokers afford this process. A broker that has no validation process should not be trusted.
Does the broker offer high enough payouts for you to make money?
Aside from your broker directly stealing your money, there is also the threat that your broker steals your money indirectly, by offering too low payouts for you to make money.
To evaluate whether a broker offers high enough payouts, we recommend getting a demo account. A demo allows you to use your broker’s full service with play money. Trade your broker’s demo for a while, and you will soon know if its payouts are high enough for you to make money.
If you are unsure where to find the right demo for your purposes, we recommend our partner site www.binaryoptionsdemo.org where we present the best binary options demos.
Is an institution controlling the broker, making sure that it doesn’t scam you?
Some brokers are regulated by government agencies. These government agencies make sure that the brokers offer a 100% legitimate service, setting standards for essential security factors such payments, validation, and banking.
What experience did other brokers and partners of the broker have?
You will never be the first trader to try a broker. Especially the bigger brokers have had hundreds of thousands of customers from all over the world, each of them testing the broker’s legitimacy in its unique way. The fact that these brokers are still around and not behind bars is a strong sign that they are no scams.
Additionally, some brokers have high profile partners such as first league soccer clubs and sports starts. These high profile partners employ lawyers that check their partners before signing up with them, which means that brokers with high profile partners are generally trustworthy.
Answer the four simple questions above before you sign up with a broker, and you will easily be able to distinguish the legitimate brokers from a binary options scam.