How to recognize binary options scams
Recognizing binary options scams can be difficult for new brokers. There are, however, a few sure indications that can tip you off to an untrustworthy broker. These indications are:
1. No free demo account
A free demo account is as essential to a binary options broker as a free test drive to a car dealer. Any broker trying to deny you this basic service is not to be trusted – the broker is obviously trying to prevent you from finding something out that you should know.
We recommend testing any binary options broker with a demo account before you sign up with them. Some brokers offer free stand-alone demos, some offer their demos as features of their regular accounts, requiring you to get their regular account, which means you have to deposit money with the broker, mostly $250. Since you can withdraw all your money after you are done with the demo, these accounts are nonetheless free.
2. No proof of identity required
As any trustworthy business, legitimate binary options brokers do not do business with anyone. They make sure that their customers are trustworthy traders, not crooks trying to launder money. For this purpose, trustworthy brokers require you to confirm your identity by sending a number of documents, most of the time pictures of your passport, a proof of address, and, if you deposited money by credit card, a picture of the credit card.
This validation process might add an extra step to your registration process, but it is absolutely essential for the broker in order to avoid legal troubles.
Any trustworthy broker employs a validation process. When you encounter a binary options broker that accepts any customer without caring about their legitimacy, this should always raise a red flag for you. Anybody who is willing to do business with crooks is most likely a crook themselves.
3. Government control / prominent partner
Some binary options broker are regulated by a government agency. Most commonly, brokers are subject to the CySEC, the Cyprian Security and Exchange commission. This agency monitors the brokers and makes sure that they offer a legitimate, honest, and trustworthy service.
Binary options brokers that are monitored by the CySEC or another government institution are generally the most trustworthy brokers. Nonetheless, there are many trustworthy brokers out there that chose to avoid government control, some of them did so in an attempt to offer you a better service.
The lack of a government should not necessarily cause you to blindly exclude a broker from your list of potential brokers. However, brokers are subject to government control can generally always be trusted.
When trying to find a trustworthy binary options broker, focus on the three characteristics we present in this article. With them, checking a broker’s trustworthiness will take less than 5 minutes, and you will get a 99.9 percent accurate result. For you final decision, you should always use the broker’s demo account to get a feeling for its performance under real trading conditions.