This is a question many traders would love to know the answer to. We decided to put all our experience with brokers and robots into one article to help traders avoid being scammed. It is important to detect potential fraud before you make a deposit; otherwise, it could be too late.
We strongly advise you to trade only at regulated brokers.
Binary scams are the sickness of the industry. Binary options, as a trading instrument, have a bad reputation mainly because of the scam schemes. Too many traders have been ripped off during the years, and they spread negative comments all over the internet.
The fact is binary options could be a profitable instrument if you use a reliable firm that won’t manipulate your transactions. There are many reputable and reliable brokers that are regulated and treat their customers fairly.
However, because of scams, the whole industry suffers, and some measures should be taken. We decided to help traders and reveal some of the most common dishonest schemes. Hopefully, you will learn to avoid them.
Scam binary brokers
You know you are dealing with a bad brokerage when you have withdrawal problems or price manipulation in your trading. Let’s be objective here: people trade so they can make money and obviously withdraw it. If your broker doesn’t let you withdraw, that defeats the whole purpose of trading. What’s the point of making profit if I can’t get to it?
What are the risks if you trade at a scam broker?
- Withdrawal issues
- Price manipulations
- Bonus frauds
- Fraud account managers
Some of the most common problems when dealing with a scam broker are delayed or canceled withdrawals for reasons that don’t make any sense.
Your withdrawal request could be transferred to the broker’s legal department for investigation. If you know you didn’t abuse the software in any way, you didn’t violate the terms and conditions, and basically, you didn’t do anything wrong/illegal, but your withdrawal is still delayed for some unclear reason, you may be dealing with a scam broker. Ask for clear explanations as to why your request ended on the legal department’s desk, and do your best to get your money out and look for a place to trade binaries elsewhere.
Another common withdrawal issue (maybe the most common) is receiving a phone call from your account manager asking you not to withdraw and offering you “incentives” to keep the money in the account. He or she will often offer you more bonus money, signals, free trades, or a higher tier account (an upgrade from your current account to a Gold or Platinum, depending on the account structure). If this happens, stay firm in your decision to withdraw and let them know you want your money, not some cheap offer. If you still don’t get the withdrawal, you might be dealing with a scam broker.
Usually, if you accept a bonus, you have to reach a certain trading volume before being able to withdraw even your own money. If this limitation only applied to the bonus amount, we would be okay with it, but some brokerages extend the limitation to your own money. It’s not fair, but it’s the way the brokers work and doesn’t necessarily mean you are dealing with a scam brokerage.
However, if you haven’t requested a bonus and a broker wants you to reach some trading volume, for example, x40 your deposit + bonus, the broker is trying to scam you and withdrawal will be almost impossible.
Brokers can manipulate the price they give you for a certain asset. If you are dealing with a scam brokerage, you can expect this to happen when you become profitable. When the broker sees you are making many profitable trades, it can change your strike price or closing price.
This is a big risk because a profitable trade will turn into a losing one. Price manipulation is not a myth, and in fact, it’s not hard to do because the broker can easily change the price you see on your account. The broker can’t change the actual market price, of course, just the price you see on its platform.
You cannot avoid price manipulation, but you can determine if it occurs, and you can act accordingly (by “accordingly,” we mean get your money out ASAP!). When you see sudden price reversals or volatility spikes, open a chart provider and check whether that movement also appears there. Netdania is a good source for free charts, but you can also find other options online.
Fraud account managers
Account managers can promise you profitable trades if you give them access to your account. This is a major issue, but unfortunately, it happens a lot with scam binary options brokers. Don’t believe for a second that an account manager wants you to make money. If you make money, the brokerage loses, and the account manager doesn’t want his or her employer to lose money.
It is also possible a manager will trade without your consent. That means he or she has access to your account, and no one but you should have access! It’s a red flag and the sign of a scam. Also, it’s time to get out because you can end up robbed.
Scam binary robots
The binary options robots are also very popular scams. This auto-trading software is heavily advertised as the best money machines. You just need to make a small deposit, and the robot will double it or even triple it in a few days.
This, supposedly outside, software that provides auto-trading is usually connected to a scam broker. In theory, you deposit money at the broker, then you connect your trading account to the robot, and the cash flows run into your bank account.
Of course, this is a deceptive illusion, and this robot will only blow your account. Then, you will contact customer support, and they will suggest you make a bigger deposit to experience the full potential of the robot.
To better understand how fraudulent this software is, you can think about the following. If this robot is so profitable and all traders make money, why is it free? How do these guys monetize?
The binary gurus
Where there is a lot of honey, there are also some flies buzzing around. In our case, the flies are so-called binary gurus. They present themselves as seasoned pro traders, former university mathematicians who have created the ultimate 99.9% winning strategy.
These guys create fake accounts on Facebook and YouTube to spam testimonial messages. They promise you big profits in the short term and usually are trying to sell you a trading system or an auto-trading robot.
What they are actually doing is creating a setup of some free MT4 indicators and trying to sell it for money. If you search Google, you can easily find these indicators and download them for free.
How to avoid scam brokers
In most cases, you realize you are dealing with a scam broker when it is already too late, so it’s best to avoid the scams before you register and make a deposit. Avoiding a scam robot is easy: you simply should not use any binary robot, unless you have created it. So, you ask, how do I avoid a scam binary broker?
To be on the safe side, your broker should be regulated with a financial institution in your country of residence, such as the CFTC in the United States, FCA in the United Kingdom or ASIC in Australia. Be aware that many brokers claim they are registered with a certain institution, but this doesn’t mean they are regulated by it.
A fully licensed and regulated company must ensure that all clients’ money is protected and held in a segregated bank account. When you visit a broker website, you should definitely check the regulation page to confirm traders’ funds are segregated.
Most scam brokers operate unregulated with registrations in offshore zones. If the broker is not regulated, it doesn’t automatically mean it is a scammer, but you’d better be on your guard. No regulation also means that you don’t have anyone to complain to in case of fraud.
Before you register at a broker, contact customer support via live chat. You can ask them all kinds of questions concerning withdrawals, price quotes and promotions. If your questions are avoided and the representative pushes you to register and deposit, chances are you are dealing with a bad broker. The support staff should offer information, not try to sell you an account.
If they offer you an account manager who is willing to trade with your funds, think twice. When you make profit, the company loses money; the binary broker simply works as a casino.
Unfortunately, there are many naive people who believe someone will make them free money. The brokers know that, and with a number of phone calls, they can even make you deposit more after you lose your first deposit.
At a fully regulated broker, it is absolutely forbidden for a third party to trade with your funds. If you submit your account details to someone else, and this someone loses your funds, the regulator can do nothing about it.
You should deal only with regulated companies
To avoid troubles, you should simply register with a regulated company that offers binary options. This way, your money will be safe and you will be able to request a withdrawal at any time.
We know there are good brokers for sure, but you still need to be a good trader to make profits. If you are looking to make some quick bucks and skip studying the markets, you will most probably end up with empty pockets anyway.
The binary options industry is not the safest out there because of all the scams that hunt your money. If you keep on your toes and stay vigilant, you can learn to avoid them.