What are binary options? How do you know whether they a legal form of online trading or not? If they are legal, how do you trade on the global financial stock markets by utilizing them as a trading instrument?
Binary options trading has become one of the most popular trading instruments utilized to trade on the global financial markets. Traders are fascinated by it because it is fast and easy. There are also hundreds of brokers online who are available for traders to trade with; thus, making it an easily accessible form of financial market trading.
Before we look at how to find a reputable and reliable online trading broker, let us consider whether binary options trading is gambling or legitimate.
There are many experts who believe that binary options trading is, in fact, a legitimized form of gambling. According to Gordon Pape, in his article entitled, ‘’Don’t Gamble on Binary Options’’, states that “there are lots of ways to lose your money in this world but here’s one I hadn’t encountered before: binary options websites…. The sites appeal to the same type of people who play poker online. But they somehow have an aura of being more respectable because they represent themselves as offering a form of investing… These are gambling sites, pure and simple.”
On the other hand, there are other experts who believe that binary options trading is a sanctioned and legal form of online trading. According to a post on ModestMoney.com: “Binary options trading is legitimate but incredibly risky. You’ve got to understand the industry and the risks involved…don’t believe reviewers who pitch binary options as a quick fix for your financial problems. In reality, nothing can be farther from the truth.”
Speculation or Sanctioned?
In my opinion, the ModestMoney.com post has hit the nail on the head. There are legitimate binary options brokerages who are registered and regulated by the Financial Regulatory boards of the countries that they are registered in; however, there are also binary options trading companies, as with most other industries, that are scams. The question that needs to be asked and answered is: How do you differentiate between legal brokers and scam brokers?
Openness and regulation
The only reason why binary options can exist as a viable financial market trading option is because the industry is regulated by global financial regulatory bodies. Brokers need to comply with this regulatory framework in order to be allowed to operate.
As recently as April 2015, the British government announced that it is preparing legislation to reclassify binary options from gambling to financial trading. This is part of the UK’s response to the EU’s Markets in Financial Instruments Directive (MiFID). It is also to be recognized as a response to the increasing popularity of binary options. The UK government has recognized the future for this industry and wishes to see it moved away from the purview of the UK’s Gambling Commission and brought firmly under the UK’s Financial Conduct Authority. This is a clear indication from the highest authorities that consumer protection must take priority over the exponential growth of the binary options industry.
Consumer Protection and KYCs
One of the consumer protection measures already in force in the binary options industry is the KYC, or Know Your Customer (KYC) rule. When you open an account with a binary options broker, you should be asked to submit proof of identity and proof of residence, amongst other documents. Some people find this step irritating and will try and find a broker that does not ask for this kind of documentation. However, if you find a broker that does not comply with the KYC regulations, you are probably dealing with a scam. A broker who complies with the governing authorities’ regulations is a serious broker and can be trusted as an online trading partner.
Finding a reliable binary options trading broker
It should be fairly obvious that a lot of research needs to go into finding a reliable and serious binary options trading partner. I believe that the starting point is to read review sites for the opinions of current traders, discussion forums, and finally, have a look at the broker’s website itself. A brokerage who is serious about helping you to make profits from binary options will make appropriate educational and training materials available on their website. Make sure of this before signing up to anything.
After an exhaustive study, I discovered that Stern Options offers the serious trader a world-class trading experience. They place a lot of importance on the formalities of KYC documentation for all their clients. The principle behind KYC is to combat fraud, money laundering, and the funding of illegal activities (such as drugs and terrorism). For more information about this I recommend checking here.
The discourse around whether binary options trading is a valid trading instrument or whether it is gambling is destined to have a positive effect on both these industries. In the case of binary options trading, technology is a crucial determining factor for the very possibility of this form of money making. Binary options trading is not going to go away because the application of the world’s financial markets to Internet based interactive technology is not going to stop. If you are wondering whether binary options has a future as a trading instrument, I believe we should bet on ’Yes’.