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Nov 17

How to Choose a Binary Options Broker

Posted by at 19:23 | Default | Comments(0) | Reads(675)

A Binary Options Broker is your ticket to the exciting world of Binary Options. Brokers make Binary Options accessible to retail traders with the end game being interesting profit margins for traders, while they (the brokers) make money from offering you access.

Sounds like a win-win, right? Ideally, it is when you choose a reliable Binary Options Broker. The only hard part in this scenario is choosing a reliable broker. The reason is simple, there are way too many of them, and the parameters that should guide your choice are equally as many.

Parameters Used to Choose a Binary Options Broker
A lot of these parameters are gimmicks made even more complicated by brilliant marketing on the part of brokers. However, the litmus test parameters to use are limited. Let’s discuss them:

1.Capitalization


In simple speak, this refers to the cash reserve of the broker which will serve as a buffer should things go awfully bad for the broker. The importance of having capitalization is to serve as security for your capital traded on your investor account with the broker.

To be exact, capitalization requirements vary across countries. For example, brokerage firms in the US are required to have capitalization of at least $20 million. While brokers in some parts of the EU are not required to meet high capitalization limits (although this is rapidly changing).

In addition to capitalization, Binary Options Brokers ensure that they are liquid enough to support the financial pressure of client’s positions by hedging their risk or underwriting their risks with third parties. It is a good idea to communicate with your broker about capitalization and if they hedge or have their risks underwritten by third parties. You should also look for good payment methods like Paypal because there are quite a few brokers that accept paypal. With paypal you can always ask for a refund, should the broker not allow you to withdraw your money.

2.Versatility


Versatility represents a one-word substitute for ‘Assets offered,’ ‘Multi-currency trading support,’ and ‘Populated asset list.’ The take-home advice is that you only want to do deal with a broker who gives you a lot of asset options.

3.Payout


This parameter thrives on two vital concepts:
•  That they return on traded positions should be sufficient
•  Compensation for out-of-the money trades which refers to the percentage of your traded capital is returned to you if your trade is out from the predetermined price (out-of-the-money)
For the basic returns on traded positions, the percentage payout should cross 65% to be worth your investment. While you should go for a broker who offers decent payout for out-of-the-money traders—around 15% of the original invested amount would do.

4.Tools


Brokers are meant to be partners in progress. It is a good idea to deal with a broker who has an extensive suite of tools to help mitigate the risk in trading and expound on your profitability. These tools include live data on assets trading, informative learning resources, economic calendars, and what not.

5.Customer Service


This parameter may be the last on this list, but it is by far one of the strongest indicator of the reliability of a broker. You do not want to wait for 24 hours to receive a reply; neither do you want to receive general regurgitated responses for very specific questions. The only way to ascertain the quality of customer service is to contact them, and gauge the kind of response you get.
In fact, there are a lot of sub-indicators with this parameter that it deserves a section of its own. But here’s the deal, if you are not confident that the customer service of a broker will have your back in the good and bad times, simply move on.

Conclusion


The 5 parameters listed above do not tell the whole story. While the ones listed are the most important, there are others, which should form part of your “Broker Choice Checklist.”
•  Secured Trading Environment
•  Type of platform used and the availability of alternatives (mobile trading platforms, for example)
•  Regulation
•  Deposit and Withdrawal options and processes
•  Expiry times
In summary, you should research more than one broker in your search for a reliable broker. Ask questions, read FAQs, read terms and conditions, consult reviews. In the end, it will all be worth the effort.


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