In my opinion binary options are a good product. However, there are binary options scams out there. When binary options first became available it was largely unregulated and unmonitored, and led to these scams. Thankfully due to regulations, this is now beginning to change. But how can consumers avoid the binary options scams that are still running, and just focus on their trading?
Read more to find out!
There are a couple of obvious red flags that warns consumers about these methods by which scams try and make money. As always, the old saying “If it seems to good to be true, it probably is” does apply with this too. Should you come across any of these scenarios below, I would advise you to be very careful. If you are unsure, rather leave the broker as there are plenty of other brokers out there who are legitimate and trustworthy. You should not have to take risks with a company you are unsure of.
Avoid binary option scams – look out for the following:
It is extremely unlikely that a reputable broker would make cold calls to gain new business. Any such a call would probably involve unrealistic claims about binary and the potential gains from trading binary. It would also downplay the risk, and come across as a means to ‘get rich quick’.
Not only phone calls, but emails or an email suggesting an account has already been created for you, are all warning signs of a possible scam. Hang up the phone and delete the emails.
Deposit bonuses are a frequent source of issues. Dishonest brokers would create unethical terms which have to be met, and can include tying in the initial deposit until the turnover requirements have been met – such as a certain amount of trades. This could then include the initial deposit and not just the bonus funds, thereby making your deposit their property. Ensure you carefully read these terms prior to making a deposit or accepting a bonus.
Do not let anyone else trade on your behalf.
This is a warning which includes automated robots, signals and managed accounts, whereby massive profits have been promised by the account manager. This can be seen as obviously questionable. If the account manager, who is employed by the broker, ensures you make a long term profit, the brokerage would make a long term loss on your account. With such a conflict of interests, allowing someone to trade on your behalf would most likely end up with losses. Managers would also encourage over investment beyond your capacity which is equally dangerous. Binary options trading is high risk vs high reward. At no time should the risks be hidden by either an account manager or a broker.
Only trade with money you can afford to lose
The ‘Make Money Online’ and ‘Get rich quick’ marketing keywords should be seen as warning signs, similar to the cold callers and account managers. Again, this form of marketing hides the risks and are very misleading. A variety of smooth websites with appealing videos suggests making money is easy and even suggests that you will be copying the success secrets of famous investors. Be assured that these are all scams, as any promotion which hides or distorts the high level of risk with binary trading is dishonest. Binary options should not be seen as an easy way to make money. Should you encounter any of these forms of advertising, it is dangerous and should be disregarded.
This is a mechanism which drives traffic to a specific broker. By clicking on an advert or an interesting looking blog, you are redirected to a specific broker. Often these funnels would make use of the “get rich quick” lure, but not always. Once a visitor has been passed through this funnel, a random broker will call requesting a deposit, and if you are not aware of how this scam operates, it is easy to get duped.
Only deposit with a broker you have chosen yourself!
Within the terms proffered by some brokers will be a line implying that “Our prices may not reflect those of the actual market”, which actually means that they set their own prices. Basically the broker becomes the counter party to any trade and can then decide the closing prices. It is almost guaranteed that you will make a loss with such a broker. Carefully review the terms of trading and ensure that all settlement figures are based on real world prices.
These are all key warnings that a potential trader should be aware of, as it would flag a possible scam. Should you run into any of the above, trade elsewhere and make note of the broker.
New traders may feel they should do their own ‘due diligence’ on a brand, but even this carries some risk. Even some review sites are as dishonest as the scam operators. For customers to protect themselves and be able to find trustworthy reviews, first look into other offerings on the review site. Should scams you know of also be promoted on that site, then the review is untrustworthy.
Ask yourself the following questions regarding that site:
– Is there a large number of robot ads?
– Are there promises of huge profits?
– Is there enough risk disclosure?
– Is it possible to contact the site or the site owners?
The second way to review a site is in regard to regulation. The Financial Conduct Authority of the UK regulates some binary options brokers, as does CySec and AML in France. This is important because regulated firms have to be careful about who promotes them.
Should a review site lists regulated brands (and we do!) that implies a level of credibility and protection. The site must be openly honest about the risk involved with binary trading, and in addition only accountable individuals should operate the site. FCA regulated firms would not allow their brands to be marketed on dodgy sites.
Although some binary options brokers have sought to be registered with the FCA, that is not the same as being regulated by them. A firm should offer additional forms of trading and not just binary, to be regulated by the FCA. Currently the UK Gambling Commission regulates and license binary options for brands who only offer binary options trading.