Whether you have been trading binary options for a short while or a long time, there are probably some things you do not know about them.  You may not even know everything about what your own broker (or the broker you are planning on using) has to offer.  Most traders who fail are traders who are under-informed, and worse, assume that they know far more than they actually do about trading.

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Broker reviews Blacklist rating Trade now Early expiry Avg returns Min deposits Min trade Ratings Trade now
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Broker reviews Blacklist rating Trade now Early expiry Avg returns Min deposits Min trade Ratings Trade now
  90% $10 $1
 
  85% $50 $1
 
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  80% - 90% $250 $5
 
  80% $250 $25
 
Broker reviews Blacklist rating Trade now Early expiry Avg returns Min deposits Min trade Ratings Trade now
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Broker reviews Blacklist rating Trade now Early expiry Avg returns Min deposits Min trade Ratings Trade now
  90% $10 $1
 
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Broker reviews Blacklist rating Trade now Early expiry Avg returns Min deposits Min trade Ratings Trade now
  90% $10 $1
 
  85% $50 $1
 
  85% $100 $5
 
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Broker reviews Blacklist rating Trade now Early expiry Avg returns Min deposits Min trade Ratings Trade now
  90% $10 $1
 
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Broker reviews Blacklist rating Trade now Early expiry Avg returns Min deposits Min trade Ratings Trade now
  90% $10 $1
 
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Broker reviews Blacklist rating Trade now Early expiry Avg returns Min deposits Min trade Ratings Trade now
  90% $10 $1
 
  85% $50 $1
 
  90% $50 $1
 
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Broker reviews Blacklist rating Trade now Early expiry Avg returns Min deposits Min trade Ratings Trade now
  90% $10 $1
 
  85% $10 $1
 
  85% $50 $1
 
  95% $250 $1
 
Broker reviews Blacklist rating Trade now Early expiry Avg returns Min deposits Min trade Ratings Trade now
90% $10 $1
 
85% $200 $20
 
85% $100 $5
 
95% $250 $1
 
80% - 90% $250 $5
 
85% $250 $5  
 
Broker reviews Blacklist rating Trade now Early expiry Avg returns Min deposits Min trade Ratings Trade now
  90% $10 $1
 
  85% $100 $5
 
  85% $50 $1
 
  85% $10 $1
 
  95% $250 $1
 
  80% $250 $25
 
Broker reviews Blacklist rating Trade now Early expiry Avg returns Min deposits Min trade Ratings Trade now
  90% $10 $1
 
  200% $50 $10
 
  85% $250 $10
 
  85% $50 $1
 
  85% $100 $5
 
  95% $250 $1
 
  85% $10 $1
 
  80% - 90% $250 $5
 
  80% $250 $25
 
  85% $250 $5  
 
Broker reviews Blacklist rating Trade now Early expiry Avg returns Min deposits Min trade Ratings Trade now
200% $50 $10
 
95% $250 $1
 
Broker reviews Blacklist rating Trade now Early expiry Avg returns Min deposits Min trade Ratings Trade now
  200% $50 $10
 
  85% $250 $10
 
  85% $200 $20
 
  95% $250 $1
 
  85% $10 $1
 
  80% - 90% $250 $5
 
  85% $250 $5  
 
Broker reviews Blacklist rating Trade now Early expiry Avg returns Min deposits Min trade Ratings Trade now
  85% $50 $1
 
  200% $50 $10
 
  85% $200 $20
 
  95% $250 $1
 
  85% $100 $5
 
  85% $10 $1
 
  80% - 90% $250 $5
 
  80% $250 $25
 
Broker reviews Blacklist rating Trade now Early expiry Avg returns Min deposits Min trade Ratings Trade now
95% $250 $1
 
85% $10 $1
 
80% - 90% $250 $5
 
85% $50 $1
 

 

Here are 5 things you may not know about trading binary options.

  1. The license numbers you see for “regulated” brokers are often misleading.

Regulation is such a big buzz word in the binary options world that you might think that it means that it is something you absolutely must look for.  The reality however is that very few binary options brokers are regulated as binary options firms, because the groundwork is still being laid.  Very few brokers are regulated as private banks and other types of financial entities, which is the closest to real regulation you will ever find.  But the vast majority has no oversight beyond the most basic level.

You know those license numbers you occasionally see listed on terms and conditions pages for brokers?  Check them more carefully, and you will discover that a large percentage of them are business license numbers only!  They do not indicate any kind of special regulatory status.  They only mean that the companies that have them are registered to do business in Cyprus (or another country).  This is not much different from registering an EIN in the U.S.  In theory, these businesses are still subject to the general laws for doing business fairly and honestly in their own countries, but there are no specific regulations concerning how financial transactions are treated.

What should you be looking for, if not a regulated broker?  Either look for a broker that is plainly regulated by a proper financial authority as a specific kind of financial entity or a company that is forthright and transparent about their lack of regulation.  Some type of financial oversight is preferable, but failing that, honesty is your next best bet.

  1. USA traders are allowed to trade binary options.

These days, every third broker seems to have its doors completely sealed off to traders from the USA.  Many companies will not let you get past the registration screen if you put in “United States” as your region.  Some will not even let you view the website anymore.  This may lead you to believe that trading binary options in the United States is illegal.  This gets even more confusing because many people trade in order to gamble, and regulations concerning gambling in the USA have always been foggy.

It is completely legal to trade binary options in the United States, though.  Just look at Nadex, the popular exchange in Chicago.  That is a US-based company, very well known, which offers binary options.  They are one of the companies on the planet that is actually regulated as a binary options broker.  Nadex has a confusing platform which is not very approachable to beginners, which is why they are not more popular with a lot of new traders.  But they are solid proof that you can trade options in the USA.

  1. You cannot trade commodity options with offshore binary options brokers.

Once you realize it is legal to trade binary options in the USA, you may become even more confused when you realize that you are still limited in what and how you can trade.  The CFTC’s rules specifically state that you can trade with offshore brokers (like binary options brokers based in Cyprus or the United Kingdom), but that you cannot trade “commodity options” with them if they are not registered with the CFTC.

This is where a lot of offshore brokers get confused as well.  In theory, they can work with you all they want if they can either get the CFTC to register them (a complicated regulatory move), or if they simply prevent you from trading commodity options.  Rather than navigate these confusing waters, many brokers close their doors.

  1. Binary options brokers do not have to scam you to make money.

This may sound like an odd thing to point out, but it is worth discussing, because many newbies in the world of binary options have no idea how binary options brokers make money, since they take the opposite side of the trades you open.  This is one reason that traders thinking about trading binary options may worry that they are going to get scammed by any broker on the planet.  After all, what is to prevent the broker from continuously losing trades if they do not manipulate the results?

There are two very good answers to this question.

  • Binary options typically pay out around 80% if you win, and return only about 10% if you lose.  Add 80% + 10%, and you will get 90%, with a gap in the broker’s favor.  The scales are tipped against you in this subtle way.  You must win more than half your trades to break even, and even more than that to become profitable.
  • The majority of binary options brokers will never be profitable over the long term, or even break even.  This is not just because the scales are stacked against them, but because most traders are here to gamble only.  They are not interested in doing the hard work it takes to win consistently.

This is why most brokers should make money by default.  You have heard the old catchphrase “the house always wins” with reference to casinos.  It is true with binary options as well.  And because the house generally wins, there is no need for them to rob you.  There are honest binary options brokers out there who run a legitimate business and make money through honest means.  You just have to find one (hint: a good starting place would be our binary options broker reviews).

  1. You are not a market expert.

Okay, so this one is a bit assumption-driven, but that is because it is written for 99% of the traders who come through and read this page.  You might be the exception.  Maybe you went to college for economics and graduated with a sterling GPA, and have spent the subsequent years working in the finance world.  Maybe you have all sorts of specific, prior experience with fundamental analysis, and you really know how the thousands of different factors that play into the market are likely to impact the outcome of a given trade.

Probably not, though.  Hopefully another 50% or so of the readers pursuing this article realize their own ignorance.  But I am willing to guess a significant portion of you believe you know far more about the market than you really do.  You may think you have gotten a handle on it because you understand one or two aspects of it—or because you are good at guessing, and your gut instinct has proven right many times in the past (odds are it has also been wrong numerous times, but you probably didn’t take special note of those times).

Socrates said that the wise man knows how little he actually knows, and admits it to himself.  The same goes for a wise trader, especially a wise new trader.  When you admit your ignorance, you stop yourself from placing foolish trades based only on your gut, and believing you will strike it rich overnight based on your instincts.  Instead, you start studying, concentrating, testing, and learning—and you give yourself a chance to become a real market expert.  And guess what?  It is the real market experts who win.

How can you start learning more about binary options before you trade live?  Have a look at the other articles on our site.  Spend some time learning the ins and outs of trading, finding out more about brokers, and studying trading techniques and trader psychology.