Financial Stability of a Broker
Financial stability of a broker binary options or forex says a lot about how well they are qualified to manage the funds and pay profits. Among the biggest concerns of binary options traders is whether their funds are safe or not.
If a broker finds themselves in a position of not imitating payments as promised, they could be forced to close their doors. While you can never know the exact amount of money a broker has saved, there are ways to determine if a broker is stable when it comes to financial stability.
A quick way to identify brokers with poor stability is to read comments. Reviews rarely mention financial stability, but they can tell you how long a broker has been in operation and whether withdrawals are processed and paid as agreed.
Feedback may or may not be helpful, as new traders often expect to receive their withdrawal immediately, when the fact is, the total withdrawal time can take up to two weeks. Unfortunately false reports of scams are quite common.
Another factor to consider are the rates of return being offered by the broker. These fees should be reasonable, ranging between 65% and 85%. Profits that are too good to be true be a warning sign. However, there are trades with a higher level of risk that carry rates of return that far exceed the average amounts, which can reach up to 1500% in some trades.
Since these types of instruments carry a high level of risk, brokers can offer them without the worry of having to pay a huge amount of gains, as in these trading categories the vast majority of traders are not successful. A broker that offers payout rates that are consistently higher than the average for other brokers could be a red flag.
What about the newest brokers on the market how do you know their stability?
There could be some reason for concern when a broker is not in operation for an extended period of time. These brokers could be as good as any other, or even better, but determining a broker's financial stability can still be difficult. In this case, it is wise to do a check to find out whether or not the broker is regulated.
Although not all solid binary options and forex brokers are regulated, but it is always good to be on the side of caution when a broker has been operating for less than a year.
Don't hesitate to ask questions about financial stability. One of the hallmarks of a great broker is excellent customer service. The broker is not obligated to answer you direct questions regarding finances, but they should be able to answer questions about where funds are held and whether payments to traders are being made, and if in fact the accounts are kept separately.
Even when regulation is not in place, operators' funds must be kept in reserve for future payments.
Don't be too concerned if a broker isn't willing to tell you the exact amount of funds they have in cash. This is sensitive information that they are not required to provide to operators (but are usually required to provide regulatory authorities). To minimize risk, use the methods mentioned above to determine whether or not there is any room for concern over the financial situation of each options or FX broker you intend to partner with.
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