Binary Options Brokers
Online sites where you can purchase binary options are often referred to as binary option brokers. This is a bit of a misnomer, since they rarely function as brokers. Instead, they create the binary options and are your counterpart in each transaction. There are also sites that are run by exchanges and were trading between clients do take place. For the purpose of this article, we will use the term binary option broker anyway since it is such a well-established term within the field of binary option investing.
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Choosing a binary option broker
Here are a few questions that you should ideally find answers to before you sign-up with a binary options broker, since it will help you select a broker that is suitable for your needs and preferences.
- Where is this broker regulated?
- Is this broker allowed to sell binary options where I live? In some jurisdictions, a license is required. In others, only exchanges are allowed to sell binary options. There are also jurisdictions where binary options are banned.
- How can I deposit and withdraw money? What are the associated costs?
- How is the platform? Can I try out the platform using a free demo account? Does the demo account require registration, or maybe even a deposit?
- How large is the minimum deposit?
- How large is the smallest possible trade?
- What types of binary options are available? (Up/Down, One Touch/No Touch, Interval, etc)
- Which categories of underlyings are available? (Equity, commodities, indices, forex, exchange rates, etc) How well-filled and varied is each category?
- Which life-spans (expiry time) are available for binary options?
- What are the payouts?
- What solutions are available for mobile trading? (Trading on my smartphone or tablet.)
- Does this binary option broker have a good reputation among binary option traders online?
If you want special features, you should of course look for these as well. Does this broker offer charting tools / technical analysis tools? Does this broker offer signal service? Is this broker compatible with the auto-trading service is prefer?
Regulated brokers in Australia
In Australia, the law classifies binary options as financial products and entities that deal in binary options must therefore hold a license from the Australian Financial Services (AFS) or be authorised by an AFS licensee. Binary options are classified as derivatives under the Corporations Act.
A professional register is available at The Australian Securities & Investments Commission’s (ASIC) site, where you can check if an entity is licensed.
- Do I have to sign-up to get a demo account with this broker? How much personal information must I hand over during the sign-up process?
- Do I have to make a first deposit to get a demo account with this broker? How large must this deposit be?
- Is there a time limit for how long I can use the demo account?
- Do I only get a limited amount of play-money to use for trades within the demo account?
Some binary option brokers allow very small deposits to be made, while others require you to deposit several hundred dollars each time you wish to refill your account. Always check out the size of the minimum deposit before you start out; it is not fun to go through the registration process only to find out that the minimum deposit is bigger than your bankroll or considerably larger than what you feel comfortable handing over to a company you’ve never dealt with before.
Even if you have a pretty big bankroll, you might still prefer to make small individual trades since it allows for more detailed risk management. Therefore, it is always a good idea to check out the size of the smallest possible trades before you sign up with a binary options broker. Are they small enough for your particular investment strategy?