The place we like to trade binaries is on Nadex. Who is regulated by the CFTC. I post this information hoping to spur you on to think and ask questions first wherever you choose to deposit your money to trade. Many traders are finding they have desired to avoid the bucket shops and stick to only regulated CFTC exchanges for binary options such as Nadex the North American Derivatives Exchange.
To find out more about why we like Nadex so much and what to look out for in a binaries broker click HERE to watch a quick information video on our top 10 list of what to look for.
Also check out their site here: http://www.nadex.com/why-nadex.html
But what about all these other binary brokers??
Lets just discuss the industry in general and some questions you may want to ask when you decide to where you want to open an account.
The CFTC is enacting regulation to regulate the industry. Knocking out many “bucketshops” which have had numerous complaints against them and helping to protect US Citizens.
First where does someone turn with so many “bucketshops” out there. “Bucketshops” are what I call a binary option brokers who who is not regulated by the CFTC or SEC(Commodity futures trading commission – US regulatory body that overseas futures exchange in the US like CME and Nadex: SEC Securities Exchange Commission that overseas securities and exchanges in the United States). I’m sure there are many definitions as seen in trading books etc… but just to be clear that is what i mean when I say bucket-shop.
So what is happening in the world outside of the US at some of these non-CFTC regulated binary options. It seems an unknown product is suddenly all over the news lately.
Valid or not it is good to know what others have said so you can look into it yourself.
I have 100’s of students who have had stated that they have had issues trading with non-CFTC regulated aka “bucket shops” binaries and decided to move to US regulated binary exchanges. Some would call them horror stories others would say they should have known better and others will say read the fine print. Either way it is good to keep up with any industry you trade in. I guess that all comes down to how you define issues or “horror stories”. I have heard many of them and just desire to share them with you so you can be prepared with some of questions you want the answer to so you are walking in with your eyes wide open when you put your deposit at a binary broker.
Of course these issues varied by offshore binary brokers that are not regulated by the CFTC. Its possible that some of them are above board and have had no issues I guess there is one way for you to find out for sure. Or maybe you can just look at some things people have seen and ask some questions to know if the place you want to trade is right for you. Either way these are some of the “issues” you may want to check into if you looking to open an account or have an account with a non-US non-CFTC regulated binary broker before starting. Some issues can easily be verified just on how the contract is setup, in terms or conditions or by asking, others are statements made, others can only be verified through experience.
We are not here to imply anything about any particular broker. This post is just a list of issues that people have stated. I hope it is helpful for you.
You may read the list and it may not matter to you or you may read the list and it may raise red flags in your comfort level. Either way it is a good list to review of things you may want to have the answers to for wherever you do your are trading.
It is good in any investment decision to make sure you ask questions so you know what the terms are and how everything works. Make sure you are aware and comfortable with whoever it is you decide to trade through.
What kind of issues have people mentioned (this list varies by broker)?
- Not able to get out of trades before expiration as the platform did not allow it.
- If early exit is allowed it was only allowed on select instruments or in select platforms provided
- If early exit only can be taken to reduce loss not to take profit
- Limit orders could not be placed to exit early the button has to be pushed at the market price so you have to sit there to do it
- May state you are in control of when you open a trade but don’t mention out of control afterwards as you can’t exit
- Have higher deposit limits. (i.e. $250, $500, $1000) as they state you can’t make your profit goals from a small amount. What concern is it of theirs? Could one not put in $100 with a $1.00 binary and grow it over time and if successful increase the size of the account to get to the base that would eventually be needed to meet desired profits. I understand deposit requirements due to risk but not do to we make you put in more because you can’t make as much as you want with less?? This will often be tongue in cheek as they will not allow you to withdrawal money until you hit a certain trading volume if you take the “bonus deal”. Risk should be the first concern of any serious trader.
- Give special treatment to those who deposit more funds…so what does that mean for everyone else? Sound of sounds like the high rollers club…Stay and play for just a little longer…but this is for you to decide
- Do not offer demo accounts to all platforms unless you have first funded an account
- Not allowed to do various strikes they basically could buy or sell where the market was (some have other types of options besides call/put binaries)
- Bonus deals where the trader did not read or understand the fine print…and got locked in…. i.e. put in 10k, get a 50% bonus at 15k now you have to trade 15x that (some have an even higher number). Meaning you have to have a volume of 10K deposit + 2.5k bonus = $15,000 x 15 = $225,000 in trades placed before you can withdrawal a cent. Oh and you can do a trade for as little as a $1.00 risk. Better buy yourself a comfortable chair and a few keyboards/mouses to keep up with all those clicks.
- Why bonus withdrawal limits…well there are a number of reasons given such as this is seen as a long term thing (a bit ironic for someone offering a 60 second option).
- Another excuse, I mean reason, given for withdrawal limits that is given is turnover must be met so people don’t deposit money and double up and withdrawal it all. Well that makes sense can’t put in 1k get a 1k bonus and turn around and get 2k withdrawal rinse and repeat. But it ignores a simple question asked by one trader. “So why don’t they just allow the original deposit to be withdrawn (less losses) until turnover is met and and also if profitable shouldn’t any profits above and beyond the bonus plus the deposit should be withdrawable (ie put in 1k get 500 balance at $1750 should i not be able to withdrawal my 1k + my 250?” . The only response they have received was the money was made with their bonus and its not theirs till they hit the turnover. They have yet to receive a real response beyond if you don’t like the terms and you may need to withdrawal then don’t do bonus. Okay understood but again why can’t original funds be withdrawn just deduct losses if the amount is under the deposit + the bonus. And if the balance is greater than the deposit and the bonus then those profits should be withdrawable. This should have no impact on the broker? Let us know if you find the answer to this one. They also may give you some “time” to decide to lock in your money on a bonus for a long term “investment” in a short term option?
- They may let you out but they will withdrawal losses, and then profits (as you made those profits with the bonus money but the losses happened with your money??) and then whats left you get. So you put in 1k get 500 have 1500. Lose 750 then make 750 does that mean you get nothing? Not sure but one thing to be sure of is to avoid the bonuses.
- They also may state the bonus its free money but obviously its not if it comes with strings attached. What will it cost you in time and potential losses having to try to trade 15, 20, 30% your deposit + the balance. One good risk management technique is to not let your account grow to large or to at least to withdrawal part of profits – after all people trade with the goal of making money.
- Difficulty withdrawing funds (i.e. same day wire transfer) stories about this issue range and are posted all over the net
- They mention US based exchanges as if you had to be in the “pit” to trade them and they could not be traded online and may decide not to mention that they are not a US CFTC or SEC regulated exchange.
- Having to provide documentation allowing you to withdrawal funds
- I have seen stories online of people having opposing positions and getting different expiration prices where both lost (Not my account so i can’t verity it but lack of CFTC oversight in non-us brokers makes me cautious)
- The broker does not do expiration based on a settlement (average of prices like Nadex/CME etc… or last trade) many do last trade
- Some do expiration price based on last quote on a non-trade-able instrument like an index like SPX which can’t even be traded – indexes can jump (gaps all over intraday) so how does a last quote work on that? (you can trade ES, SPY, options on SPX but you can’t trade SPX itslef so why would you base a financial instrument on a non-tradeable product). Definitely should watch out for this.
- Having to wire money outside the United States,
- Not being able to do 1:1 risk/reward or better trades, ie 75% payouts meaning 100% losses. Or they have the we give you 15% of your losses back…75% payouts 85% loss of risk capital. One or the other.)
- They are all about highlighting the reward payouts 70% 80% 90% but they do not balance it with the reality of the loss of 100% on each trade on the exact same page (well it may be hidden in a disclaimer or something).
- Only allowing greater than 1:1 risk/reward trades to be placed on weekends when the market is closed.
- Having greater than 1:1 risk reward trades be extremely far away from the market (this is of course relative to what you consider far from the market)
- Being told you have to be a VIP member (aka large deposit) to visit their location/office in the states (well those who still have one). Seems a bit odd.
- Finding out a % based on the deposit up to 20% of the deposit was paid as a commission to a referring affiliate (I’m not talking a bout licensed and regulated introducing brokers licensed by say the NFA or SEC just someone with a list). The question to ask is where does the 20% come from? What happens when the deposits stop and everyone withdrawals (aka intrade) Do they assume everyone is going to lose? Can’t answer the questions but it is worth asking? Does the broker have an affiliate program based on a % of all deposits without being licensed by the NFA or SEC?
- Along with an extensive long list of various issues varying in nature and severity…..
Note the statements above about issues are not targeted at any specific broker t but a collection of statements that you will want to independently ask questions of the broker whom you choose to trade with.
The list above and the video above should give you a good list of questions to ask regarding issues that you may be concerned about when trying to decide where you want to trade binaries.
VERY IMPORTANT Check out this link as well for more games and scams played by binary brokers and warned about by the CFTC: HERE
To find out more about why we like Nadex so much and what to look out for in a binaries broker click HERE
Recent News About Some Offshore Binary Brokers Who Are Not Regulated By The CFTC: CLICK HERE