Common Binary Option Scams You Should Avoid

Common Binary Option Scams You Should Avoid

Submitted by adil on Wed, 04/23/2014 - 09:58

With binary option market becoming more popular with each day, many hustler brokers emerge to scam potential customers. Binary options market is safe as any financial market, yet the peril exists and if you want to trade binary options be wary of these scam models.

Bonus Scams

Bonuses are supposed to be a good thing. Usually service providers offer bonuses to their customers and this should be lucrative for both sides: providers attract more customers, clients get something for free. The catch is that sometimes what they get is not free, and the bonus is misused to lure traders to make deposits, before dropping down loads of insane conditions making it impossible for traders to withdraw money. Beware of brokers offering 100% bonuses and carefully read regulations about money withdrawal. This is the snippet of one of the real-life conditions:

The trader would have to generate up to 30 times the bonus volume in order to qualify to make any withdrawals from the account.

Let’s do the math. Even if the trader makes 10 successful trades a day, it would still take more than two years to be able to withdraw money. Always check what is behind bonuses you are offered!

Vague Regulation

A mass of rogue brokers appeared, establishing their HQ in some of the countries with no proper financial regulations. They opened offices ashore to lure foreign traders. But the trick is that when something goes wrong for the clients, they have no one to turn to, because the broker is located in the country with no jurisdiction. Good news is that many countries are tackling this issue and working hard to regulate, so rogue brokers are made to flee these countries, which were once a safe haven for these outlaw brokers.

Account Closure & Cash Seizure

You should be careful to avoid brokers who have vague terms and conditions and change them as the wind blows. There’s a well-known real example of a trader on Seychelles who had his account blocked and funds seized due to “third party trade violations”. He was accused of allowing other people to trade from his account at the same time. As Seychelles have no regulating body, he ended-up losing the case.

Trades Blockage

Brokerage houses work the same way as the banks do - the principle is that not all clients will withdraw their money at the same moment, leaving the bank, or in this case, the broker undercapitalized. In the banking system, the Central Bank can inject money into these banks to protect clients, but there’s no such body for brokers. So rogue brokers tend to block trades and client’s assets. For this purpose, regulated countries require brokers to operate separate accounts for traders’ money, protecting it from misuse. So if you notice an excessive number of trade blocks, you should consider leaving that broker, because he is probably undercapitalized and will go down with the funds.

The only safe way to avoid scams is to do your homework before choosing a broker. So always be sure to look for brokers with established reputation, don’t go for huge bonuses and shiny promises.