Black brokers – these brokers should be better avoided

When it comes to trading speculative financial products, it’s not just about the right strategies and good risk management. The right place broker options plays an important role. Unfortunately, some brokers have had serious problems. Fortunately, there are also many providers who work diligently and seriously. The following article tells how to separate the wheat from the chaff and brokers to avoid. Open a trading account in Options IQ now

 

What does good regulation mean?

 

Through the licensing of brokers by regulatory and supervisory bodies, it is to ensure that the rights of customers are respected and that their data and money are properly protected. The protection of money laundering and fraud is also an important task of the regulatory authorities. However, the standards that brokers must meet when they are regulated by a particular regulator are determined by them and vary from authority to authority. For this reason, it is important to check the competent authority, although this is not a serious absolute guarantee, if the broker is controlled by a very reliable and strict authority, the broker has the competence to offer its services and he must comply with certain regulations.

Client funds are managed separately

An important standard set by all European authorities and many non-European regulators is the management of separate client funds. Ultimately, it is the property of the client and therefore cannot be used for other brokerage problems. Therefore, brokers must collect money for advertising, administrative or other expenses elsewhere. Customer deposits only serve to provide the necessary margins in the trade. The clear separation of these funds makes it possible in many cases, even in the event of bankruptcy, to repay the money to the client. Good regulators also support this cause and see to the right solutions for insolvency settlements and that clients of bankruptcy brokers receive their money.

In addition to the fact that client funds are managed separately, it is also important that they are managed. This again speaks to brokers if it manages financial institutions at high-ranking banks.

 

Investigators are looking for evidence of price manipulation

Managing the right design of the trading price is also one of the best tasks for the regulator. However, this can be difficult, especially for the broad market maker, since in this case the broker has the price itself and therefore at least legally as the direct competitor of the client in the trade. A reliable seller protects against potential trade loss by balancing all the trades of its customers through an automated process and placing the trade in a position against that of the other seller. So brokers earn their profits only from the trading fees they get from clients.

However, by not hedging against direct trading losses to its clients in the financial market, but by manipulating prices so that clients lose more money from their gains, it is possible for them to make a higher profit. To recognize and punish fraud, strict regulatory authority, which is a price trend for all brokers, is appropriate. When it comes to deviation, it will continue. If fraud through price manipulation is detected, brokers face heavy fines and the license is immediately revoked.

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Risk warnings on brokerage websites

Warning of risks traded in speculative financial products such as forex, CFD and binary options is also one of the provisions that regulators impose on brokers assigned to them.

At the moment, online brokerage sites indicate a high risk of loss, which can prolong the total loss of the deposit.

Although the broker’s goal is to win customers and earn money with trading fees, this is not possible with the pretense of the fact. By giving a warning against the high risk of losing a form of speculative investment, it aims to prevent clients from signing up with the broker under misunderstandings and not being sufficiently informed about the high risk.

 

Is this form of investment suitable for customers?

When opening a trading account, most brokers require not only personal information such as name, address and telephone number, but also information about the client’s financial situation and previous trading experience with the financial product. Some traders may not be aware that this information when registering with an online broker, what is their monthly income and what products they have traded in the past, protects their clients.

For regulators working according to the EU standards, this information is mandatory. Potential customers, whose planned investments in the offered products do not provide sufficient insurance and are therefore not appropriate, may not trade or at least are not discouraged from trading. Brokers hesitate to accept all their clients at this stage, as every trader is ultimately a beneficiary of a broker. Under strict conditions of regulation is to ensure not only the greatest profit, but also the care of traders is not affected by investments that do not financially damage products that are not suitable for them.

 

Warnings about “foreign brokers”

Some of the active brokers in the market are headquartered in remote Caribbean countries and are therefore regulated by local authorities. The Seychelles, on the east coast of Africa, is the perfect seat for financial services providers. Although local authorities also impose certain conditions that regulators must meet, these are often less stringent than EU or UK regulations. Also, in many cases, control is less intense, so brokers who are skeptical about “foreign rules” have more opportunities for fraud.

However, this does not mean that all brokers based in the Caribbean or Africa are automatically suspect. Here, however, the risk of finding the wrong broker is greater than with a broker controlled by a European agency. The legal options for traders are also better with the EU regulations than with the so-called foreign brokers. When it comes to brokerage claims, it does not need to be led to the end of the world, which is practically impossible for Trader to do. For this reason, we only recommend brokers that are regulated by respected authorities and therefore must be under strict control.

 

There are many regulatory authorities in the EU. The regulatory authority of the supplier depends on the country in which its head office is located.

In particular, many EU brokers on the island of Cyprus are regulated by the Cyprus Securities and Exchange Commission (CySEC). This is because the tax requirements for financial services businesses in Cyprus are very attractive. However, strict EU guidelines also apply here.

The German-based broker is regulated by the Federal Financial Supervisory Authority (BaFin). However, there are almost no German brokers, as other EU countries often offer financial benefits under similar regulatory conditions. If a broker maintains a branch in Africa, it is mostly controlled by the German BaFin in some locations. Although without a German branch, many brokers are registered with BaFin. However, this registration is not related to any comprehensive regulations, and the responsibility remains with the headquarters of the country.

Brokers in the EU may also experience problems

While the EU regulations are in line with high standards and are intended to ensure the safety of binary options trading, there is no guarantee that it will not be in trouble. Unfortunately, regulators have had to intervene with European brokers in the past. Although hedging usually works well, clients usually get their money back when it comes to payment. But the EU regulations cannot provide 100% protection against fraud or unfair business practices. Therefore, traders should always pay attention and invest only with a lot of money with the broker they are dealing with.

What to do if there is a problem with the broker?

If there is a problem with the trade, for example, if the broker does not pay the account balance within a reasonable time, you must first make an explanation regarding the customer service of the offer. If that doesn’t work, there are other places that can help traders. Consumer centers know, among other things, what is going on, what to do. There are also further complaints against the broker. It is also possible to contact the relevant regulatory authority directly, who can alert the broker to his obligations and, if necessary, take further action. In case of doubt, it is advisable to contact a lawyer. For EU brokers, there is the advantage that a lawsuit can be brought before a German court,

These brokers are warned:

Below we have compiled a list of brokers that we recommend to register and deposit for various reasons.

 

 

Banc de Binary:  Due to some concerns and complaints from investors, brokers voluntarily resigned a CySEC license in 2017, ahead of the revocation.

TopOption: Brokers have been one of the leading online brokers for some time. However, there are allegations of fraud and reporting problems with the reward, so brokers can no longer be recommended.

GrandOption:  The parent company of this broker, Rodeler Limited, has been fined €156,000 by CySEC’s watchdogs for problems in various ways. The regulatory intervention involves, among other things, unfair advertising, insufficient security and the failure of brokers to respond to customer inquiries and complaints.

ZoneOptions: This Cyprus broker is not recommended by us.

CapitalOption:  Due to the lack of transparency and sometimes contradictory information on the website, this binary options trading provider is not recommended.

Winner Options: Like TopOption brokers, Winner Options are available through the Savecap Investments company and are therefore not recommended.

OptionTrade: OptionTrade broker works in October 2016 and is no longer available for binary options trading.

Dukascopy:  This website is very misleading. Hidden charges may be incurred when trading through this Swiss provider. In addition, Switzerland is not a member of the EU, so complaints about legal issues are more complicated than brokers through the EU.

OptionBit:  This broker was previously regulated by CySEC. According to the OptionBit website, brokers are currently regulated by the island nation of Saint Vincent and the Grenadines and are therefore one of the foreign brokers to be wary of for the above reasons.

Algobit:  Algobit is not a broker but a trading tool that identifies trading signals and gives traders a suggestion on when to place a trade. Because Algobit is offered by OptionBit brokers, which are on the blacklist of our broker, the use of this tool is also discouraged.

 

Broker’s general terms and conditions

Before registering with a binary options broker, prospective clients should read the terms and conditions of the provider in full and register and deposit the money in case of uncertainty about the exact terms.

Check if the broker limits your rights as a trader with certain clauses. In the past, for example, individual brokers often had problems with payments because certain conditions had to be met.

If you read and fully understand and agree to the terms and conditions of the broker, you will need to login.

 

Even without the fault of a broker, this can lead to huge losses

Even with reputable online brokers, there is no loss protection. Of course, it is recommended that you pay attention to the good rules. But even if brokers meet all these requirements and work seriously, binary options, forex and CFD carry a high risk. It is a highly speculative form of investment in which profits and losses are subject to high volatility, despite extensive professional price analysis. Traders should always be aware of this and consider the money invested as venture capital. For example, a common mistake beginners make is investing too much money in one position. On the one hand, risk management always uses only a small percentage of the credit amount per trade. therefore,

Traders should also be aware of the financing responsibility, which consists of many brokers for Forex and CFD. Although positions are usually closed quickly when the required margin is no longer available, at extremely volatile prices, it is possible that this automatic closing may only occur after a large price drop and the trader loses more money than in his trading account. In this case, a new deposit is required to make a negative balance. To avoid this risk, it is possible to deliberately select brokers that do not explicitly include margin requirements in their terms and conditions,

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