As the financial markets became decentralized – thanks to the internet, traders with little capital could now participate directly. Brokers scrambled to build online platforms that would enable traders invest in the financial markets for a small fee. New financial instruments were created. Among these were options.
Binary Options quickly gained popularity because they did not require a huge investment to trade in. With as little as $1, a trader was able to speculate on an underlying asset’s price movements and earn a fixed return – in as little as 60 seconds.
As usual, where there’s money to be made, there will always be a scammer around the corner waiting to cash in on unsuspecting victims.
New online options brokers kept popping up. However, a good number were scams designed to fleece unsuspecting traders off their money. Governments in North America and Europe stepped in. They created tough regulations which virtually prevented options brokers from operating within these regions.
So these unregulated brokers turned their focus on other regions including Latin America, Eastern Europe and Asia. However, governments in these regions also responded by introducing regulatory laws.
This however hasn’t stopped scam brokers from operating. Many will launch, operate for a few months or years and close shop. At the same time, getting away with millions of trader’s money.
This guide will teach you how to identify scam options brokers as well as why IQ Option is a good pick.
- 1 How do you identify a scam broker?
- 1.1 What introducing brokers say about the platform
- 1.2 Platform takes form of a multi-level marketing business
- 2 Why choose IQ Option?
- 3 How useful was this post?
- 4 As you found this post useful...
How do you identify a scam broker?
There are several ways to identify a scam options broker. They include the following.
This is perhaps the easiest way to identify a scam options broker. If a broker doesn’t provide their regulation status, this is a red flag. Do not invest your money with them.
Regulation has several benefits. Among these is that your deposits are insured. This means that you can get compensated for losses you incur in case the broker goes under.
Now, if a broker is regulated, they must also provide information regarding which countries in which they do not offer their services.
For example, IQ Option doesn’t offer their services to North American citizens. In addition, they don’t offer VIP accounts to citizens of the EU. This is explicitly stated on their website.
Location and contacts
Before investing your money with any broker, it’s always recommended to find out where they’re located as well as their contact numbers. This information should be readily available on their primary website. Their office addresses should also be available (as opposed to a PO BOX).
Try to contact their support team and ask questions regarding their platform and trading in general. If they don’t seem to have an idea about what your asking, it’s best to avoid dealing with them.
Where their clients are based
Many of the popular online options platforms will claim to have over 1 million active accounts. While this might be true, the important thing to consider is just where these clients come from.
There’s no point in trading with a broker that has 1 million traders from a handful of countries. Make sure to do a Google Trends search on the platform in question. If the platform’s traders come from different regions (including yours), it might be a good broker.
Types of financial instruments offered
Top brokers will offer hundreds of financial instruments derived from different asset classes. If a platform claims to offer options only, it’s likely that they are a scam. All brokers know that options are high risk.
Majority of traders are bound to lose money trading them. If a broker offers options only, their main goal might be manipulating prices – which I’ll cover next. After making money from trader’s losses, the broker will simply close shop.
This tactic is aimed at ensuring that majority of trades end up losing. Since the broker owns the trading software, they have control over the prices that appear on the charts.
An easy way to identify this manipulation is to open the broker’s platform alongside a free platform such as MT4. Then compare the price charts of the same asset in real time.
Complaints by traders regarding financial transactions
If you come across online trader complaints that a broker doesn’t process their withdrawal requests or has hidden fees, consider this a warning not to invest with them. Many options brokers will claim not to charge deposit, withdrawal or trading fees. However, this changes once you join their platform.
What introducing brokers say about the platform
Introducing Brokers are simply individuals or businesses that refer new traders to options platforms in exchange for commission. It’s rare to find IBs discouraging traders from joining a particular trading platform. But if you find that several affiliate partners actually claiming that a particular platform is a scam, take note. It might be true.
On the other hand, if you find IBs aggressively promoting a new platform with claims of the millions to be made there, this is yet another red flag. No options broker opens shop to give away free money.
Platform takes form of a multi-level marketing business
Would you refer your friend, partner or sibling to a trading platform even if you know they cannot trade? What if the platform offered your $50 for every one that opens a trading account?
That’s MLM 101. Many scam platforms have adopted this business model. To hook you in, you might be offered a free trading account with something like $30.
However, once you’ve opened and account (and made some money), you’ll be encouraged to refer new members for more free money to trade with. The problem is, the platform is rigged to ensure that your trades are winners. You reckon it’s easy trading there and anyone can do it.
However, it’s only once you’ve recruited other new members with real money accounts that you’ll get paid. Anyone with real money accounts on the other hand doesn’t enjoy the luxury of “winning” trades.
And this cycle keeps repeating itself until the platform finally collapses.
Why choose IQ Option?
Since its launch in 2014, IQ Option has been a leader in innovation as far as online options platforms go. The broker has undergone major improvements over the 4 plus years they’ve been in existence. They’re fully regulated by Cysec and offer hundreds of different financial instruments to trade in.
Being a trader focus platform, IQ Option has invested in tons of educational material that includes video tutorials on how to trade. They also have a regularly updated blog that provides tips to traders.
Their customer support team is readily available. Deposits and withdrawals are fast and, the platform continuously adds new payment methods to accommodate traders from different regions.
The IQ Option platform is accessible through desktop and mobile devices. They also provide a free practice account that can be recharged with $10000 virtual cash should your account balance fall below $2000.
A lot can be said about the IQ Option platform but one thing remains true – they are a legit options broker.
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