In this day and age, scam options brokers are a dime a dozen. Thanks to the rise of the internet, financial markets soon became decentralized, opening up a whole new world to aspiring traders. Due to this, even those who only have little capital are able to trade and invest in online financial markets.
Sadly, as with everything else: where there is money, there is a scam to be uncovered. If you’re a beginner trader on the internet, you should be very wary of scams, especially scam options brokers, that seem to be popping up from everywhere these days.
Don’t worry, you won’t be alone in your journey! In today’s guide, I’ll teach you how you can identify scam options brokers from a mile away. You’ll also find out why you should choose Binomo if you want to trade safely and effectively.
How do you identify scam options brokers?
Binary options refer to a form of financial product that allows people to win or lose money depending on the result once the time expires.
Here’s a concrete example. You decide to enter a 60-second trade. You only have two options: higher or lower, hence the name binary options. Once the 60 seconds is up, you’ll either win or lose depending on what your choice was and what the outcome was. For instance, if you chose higher and the price fell, you lose. If you chose lower and the price did fall, then you win.
As you can see, it’s an extremely easy way for beginners to earn money for as low as $1. In theory, it’s basically all speculation. Make the right guess, you win. Make the wrong guess, you lose. But of course, in practice, it’s practically the same as trading other financial products, which means you’ll have to hone your skills and strategies as well.
Now, when people discovered that they could trade on the internet, it created a high demand for a specific niche: options brokers. Various brokers started opening up, eager to welcome an entire slew of beginner traders who are interested in dipping their toes into trading. To become more attractive to newbies, these brokers would charge just a small fee, promising big money in return.
Unfortunately, if something sounds too good to be true, it probably is. As more and more people got scammed, governments in North America and Europe began to step in. They made sure to implement new regulations that would protect traders, especially those who are only starting out.
Because of the regulations, all unregulated brokers were suddenly unable to continue their operations within these regions, forcing them to operate in regions like Asia, Eastern Europe, and Latin America. Eventually, these new regions also started implementing their own rules and regulations, leaving these brokers to go hide underground.
Occasionally, some of them would pop up here and there, with the aim of scamming as many people in the shortest time possible. They’d usually disappear just as soon as they appeared, taking hundreds of thousands, if not millions, of dollars with them.
Feeling scared that you’ll fall victim to one? Here are some of the tell-tale signs for identifying scam options brokers!
The easiest and most straightforward way to identify scam options brokers is to take a look at their regulation status. If they’re unregulated, it typically means that they’re sketchy, so you’re better off looking for another broker to invest with.
What’s so special about being regulated, anyway? Well, first and foremost, when a broker is regulated, that means they passed the basic qualifications needed by the regulators.
Two, regulated brokers are mandated by law to provide information about their service. This includes things like which countries they offer and do not offer their services.
Lastly, regulated brokers make sure that your deposits are insured. If a regulated broker goes bankrupt, you can receive compensation for your losses. If it’s unregulated, however, you have no choice but to say a bitter goodbye to your investments, just like thousands of other people who have already been tricked into investing with unregulated brokers before.
A lot of online brokers claim the most amazing things. Some claim you can earn a certain amount of money within a very limited time. Others, meanwhile, claim to have a large number of accounts, typically over 1 million active users. Although it’s not out of the realm possibility, you have to be smart and think: Where did these clients come from?
If a broker happens to have 1 million traders but they’re coming from only a couple of countries, you should be a bit wary. In order to be sure, make a Google Trends search yourself to see where the broker’s client base comes from. If it has users from dozens of countries, preferably including yours, then it might be a real broker after all.
Location and contact method
Before you even think about investing in any specific broker, you should first check the location and contact methods for the company.
Why the location? Of course, it’s always a good idea to know where your broker is operating from. Usually, this information can be found on the company’s main website, aside from their PO Box address.
You should also check out what contact methods are available. You might even want to contact the support team yourself so that you’ll know yourself if they’re decent. A real company will make the effort to communicate properly with their users, especially if you’re handing your money to them. If the support team seems to be clueless or unprofessional, you might be dealing with scam options brokers.
Possible price manipulation
One tactic used by scam options brokers is to ensure that most trades performed on their platform end in a loss. This is typically done through price manipulation, which is fairly easy considering the fact that the broker owns its own trading software. This means that theoretically speaking, they can always control the prices that show up on the screen.
If you want to check for possible price manipulation, all you have to do is to open the broker’s platform as well as another free platform, like MT4, for instance. By comparing the two platforms side by side, you’ll be able to see whether there are some sketchy things in the broker’s charts. Obviously, if you see even a tiny sign of manipulation, better look elsewhere.
Available financial instruments
Most online brokers offer several different kinds of financial instruments, aside from popular ones like options. That’s because many traders like different types of assets, such as Forex options and cryptocurrencies.
Remember, the biggest, most successful brokers typically offer dozens if not hundreds of financial instruments. If you see a broker that claims to offer only one kind of asset, say, just options, it’s very likely that you’re looking at a scam broker.
Options are very high-risk so no reputable broker will offer just this one asset. If you find a broker that only offers options, it’s possible that they’re planning to manipulate prices, which we already discussed in the previous point. Once scam options brokers gain enough money from the traders’ collective losses, they won’t waste any time in shutting down operations as fast as they can.
Why did you get into trading? Ideally, your answer should be because you enjoy trading. Does this mean you would recommend trading to other people? What about to people who have no interest at all in trading? Would you still bother changing their mind?
What if a broker promises you that for every person you refer to sign up for the platform, you can get a $50 bonus? Now, would you actually bother?
For a lot of people, the answer is yes. That’s how they get hooked into what we call an MLM, or a multi-level marketing scheme. It can also be referred to as network marketing or referral marketing.
Many people think it’s a legitimate business structure, but 99 times out of 100k, it’s not. Remember, scam options brokers tend to do price manipulation too, which makes it hard to win trades and earn money. So if the broker also operates on an MLM structure, it means that you’d have no choice but to recruit people in order to make money.
At this point, the ‘pyramid’ business structure just goes straight into a pyramid scam. Think about it. The only way you’ll earn money is if you recruit people, and the only way they’ll earn money is if they recruit other people. When you all run out of people to recruit, the pyramid, and thus the company, will collapse, therefore leaving everyone at or near the bottom with potentially massive losses. This is exactly what happened to thousands of traders back in 2018 who got involved in a $722 million Bitcoin scam.
If you see this business structure on an online broker, I only have one tip for you: run.
How a company treats its customers says plenty about the company itself. Before investing your money in a specific broker, make sure to check what other traders have to say about it.
If you see complaints from traders saying that the broker charges hidden fees or that it doesn’t process withdrawal requests, consider yourself warned. You should also find reviews supporting everything that the broker claims, just to be sure that they’re true to their word. Something as simple as ‘no hidden charges’ could take you by surprise if the broker suddenly charges when you’ve already invested with them.
Introducing brokers refer to brokers, either individuals or businesses, who directly communicate with clients but refer them to other brokers in exchange for a commission.
Most, if not all, IBs will redirect you to only reputable sites, though you do have to be careful as well. Some IBs will aggressively promote a scummy website without doing a lot of research. Take note that they’re doing this to earn a commission, so you do have to take their advice with a grain of salt.
However, if several IBs say that a specific platform is actually a scam, heed their words. You might be surprised that it’s actually true.
Why choose Binomo?
So, why should you choose Binomo? For one, Binomo has been around since 2014. In its almost 6 years of existence, it has already improved considerably, undergoing major changes in the platform itself.
Binomo has a CROFR (Certification Rules of Obtaining the FMRC Certification) from the Financial Market Regulations Center (FMRC) and since 2018, it’s been a Category A member of the International Financial Commission (IFC). Currently, it’s in the process of getting approval from CySEC (Cyprus Securities and Exchange Commission).
Because Binomo cares greatly for its traders, the site has plenty of educational materials such as video tutorials and a regularly updated blog. The support team also makes sure to respond to all queries and concerns on time.
As of this writing, Binomo is continuously adding new payment methods that are available in various regions in order to quickly accommodate everyone’s deposits and withdrawal requests.
Binomo even offers a free practice account to anyone who wants to familiarize themselves with trading before diving into the real deal.
With all that said, if you’re looking for a legitimate options broker that won’t scam you out of your hard-earned money, Binomo is definitely the way to go.
Good luck on your trading journey with Binomo!
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