Why You Must Trade Binary Options With Regulated Companies

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There are regulated as well as unregulated brokers in the binary options market. Trading in the binary options markets is a reality in many countries. However, in countries such as the US, it is compulsory that the traders should always pick a broker that is regulated. In European countries and many other parts of the world, binary options brokers are regulated by the European Union and some other brokers are regulated by the Cyprus Securities and Exchange Commission (CySEC). It is the most popular forex regulator and is looked up to by the binary options trading community to set up a regulatory framework.

In times before online trading became so common as they are today, one could trade binary options only over the counter from the issuer directly to the buyer. These instruments could not be sold between the periods of issuance and expiry. In the United States, the Chicago Board Options Exchange was started in the year 1973 which started regulating binary options trades. The Options Clearing Corporation in the US was started with the growing need for implementing controls and monitoring binary options trades. Traders were then required to maintain a license for the purpose of exchanging or over-the-counter sales of binary options.

Online binary options started around the year 2008 and pioneers of the online trading operations chose to become licensed and regulated players. This was after CBOE and NYSE Amex launched binary options under the name of Fixed Returns Options (FROs).

Trading binary options is popular amongst the beginners as well as the seasoned traders. Binary options are less complicated and easy to understand. The most important point is that the trader is completely informed of the risk and the reward that is involved in the trades. In the light of this information, it I important to understand that for a binary options trader to succeed, it is important that they work with licensed and regulated binary options brokers to achieve their financial goals using this instrument.

Given below are a few reasons as to why it is a good idea to work with regulated binary options brokers.

#1: A trader purchases binary options directly from the broker that provides the trading platform. It is, therefore, of utmost importance that the trader picks a trustworthy broker to work with. This would mean that the trader has a chance to receive accurate advice, gets a chance to work with fair prices and also assured of reasonable returns in case the trades are successful. Regulated brokers will have more interest in the success of their clients and the traders get the best deal on all aspects of the binary options trades.

#2: Regulated binary options brokers have no choice but maintain the funds of their clients as well as their company’s funds separately. This increases the security of the investors’ funds retained with the brokers.

#3: With regulated brokers, prior to granting their operations license, it is ensured that they are possession of a sufficient amount of financial capital that will enable them to run their operations of providing the trading platform to the traders without any hitch, deliver the appropriate price quotes and offer payouts to the winning trades without any delay whatsoever.

In the real-time scenario, it is true that starting every week, there are close to ten new brokers that start their operations. It is also true that a majority of these brokers function in the unregulated sector. There may be just a handful of regulated brokers functioning in the market. The next challenge is to pick out the best ones from these brokers that you can work with to realize your financial goals. Brokers that are regulated does not necessarily mean that they are good. Choosing the right broker to work involves examination of factors such as the company and its capitalization, the quality and type of trading platform that is offered, type of assets that are offered for trading, security measures, payout methods, etc., among others.

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Risk Warning : The financial products offered by the company carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose.

Lack of regulation may turn away many investors from taking part in binary options trading. Many unregulated brokers are known to indulge in unfair trade practices. These two main factors require that the binary options market must function with regulations. All said and done, it is not an easy task to implement regulations on a global scale.

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In the year 2020, CySEC ruled that binary options brokers would comply to the Investment Services and Activities and Regulated Market Law of 2007 – 2009. Implementation of this rule meant that it was compulsory for those binary options brokers functioning in the specified region would have to apply for a license as a Cyprus Investment firm to continue with their operations. Regulated binary options brokers also have to file tax returns as well as submit two-year business plans as part of compliance with the regulations.

Regulations also stipulate that the brokers would have to maintain separate funds of the clients’ capital investments and the company’s money separately. This helped to increase the confidence of the existing clients and helped to bring in many new ones as well.

As a closing thought, investors should not be in a hurry when choosing the binary options broker to work with. They should study the operations of the broker that they have identified patiently and only after they are completely satisfied should they sign the contract. The investor can also make sure that withdrawal of funds is an easy procedure by making a small deposit. In case all these tests turn out positive, the investor can make larger deposits and decide to work with the chosen binary options broker.

It is equally important for the investor to test the customer services department of the broker. The investor should make sure that they get a good response from the customer service personnel to execute their trades successfully. The trading platform can be tested by opening a demo account and working on it prior to making the real-time trades.

In the recent past, many of the binary options brokers have been getting ready to comply with regulatory changes that are on the anvil as well as those that have already been implemented. This ensures that more investors will be trading with regulated binary options brokers in the near future.

7 Binary Options

If you have been trading binary options for some time, you have probably noticed that there are two types of brokers out there: regulated and unregulated. In some countries such as the USA, it is compulsory for traders to register with licensed and regulated brokers. In others (nearly all European countries) it is not an obligation but still, traders prefer to work with a regulated broker. Why is that? What are the benefits? Let’s find out!

Why Is Binary Options Trading So Popular?

Trading binary options has been becoming increasingly popular for many years now amongst beginner as well as seasoned traders. Compared to other forms of online, binary options are easier to comprehend and get a grip of. The most important thing is that the trader is informed of all the risks and the rewards that their trades can result in at all times. Considering this, it is crucial to understand that in order for a binary options trader to succeed, it is important that they choose to trade with regulated binary options brokers and use reliable instruments for this purpose.

Why Trade With a Regulated Broker?

All in all, there are three possible reasons traders prefer trading with regulated brokers only. They are:

  1. When trading with a binary options broker, you buy binary options right from this very broker. It is for this very reason that it is of most extreme significance that you pick a reliable representative to work with. This would imply that regulated brokers are more interested in their traders’ success. Therefore, they are simply a better choice.
  2. Regulated brokers must keep up the assets of their customers independently from their company’s assets. This way, if anything happens to the broker, its traders will still get their money.
  3. Regulated brokers have to guarantee that they are in possession of an adequate amount of financial capital that allows running their trading operations with no issues

As you can see, there are numerous benefits to choosing a regulated broker over all others that are on the market. After all, having the right broker is one of the most important things in your trading strategy, so why take a risk.

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American Traders Guide

The USA is a tricky place to trade binary options from. With regulations and laws continually changing, you may be asking yourself if the information you have is correct and up to date. Firstly, it is “not” illegal to use binary options in the US. However, you may find it more of a challenge compared to other countries.

That said binary options trading is not as regulated as compared to Forex or other trading types so the restrictions are not as tight as they could be. It is essential though to make sure you trade with a reputable, regulated broker whether USA based or as long as they legally accept US traders.

With the recent spotlight on online trading, many US traders now find themselves without a reliable broker. Who can you open an account with and are there are any regulations that you should be aware of? Well, we are here to answer those questions and provide you with advice through our carefully curated list of brokers.

In this article, you will learn:

    The brokers best suited to your needs What local payment methods are accepted Taxes and fees that apply to US residents

Traders in The USA

While binary trading in the US is legal, the Commodity Futures Trading Commission (CFTC) classed options trading as akin to gambling and put in place sanctions and legislation similar to those that govern casinos. These rules prevent many international firms from advertising their services and soliciting US traders which then leads them to stop accepting new signups. The limited choice of international brokers available means traders sometimes choose a locally based broker.

While it is difficult to find an international broker that accepts US traders, there are still some good ones to choose. With increased regulations, many brokerages have now decided to move their head offices to locations like London and Cyprus making it hard to find a good USA broker. So, in such a heavily regulated binary options market, what should you be looking for and how do you know which broker to choose? We take a look at some of the things you should be looking out for:

Licensing And Regulation

When something is as heavily restricted as binary options trading is in the US, there will be companies that try and trade under the radar! Exercise caution and make sure you choose a broker with reputable licensing and regulation.

Asset And Trade Types

With a restriction on brokers that you can choose from, you want to make sure that you pick one that offers everything you want. Make sure they provide the range of assets that you are looking for and a variety of trade types.

Mobile Trading Features

Trading on the go has become critical to many of you. Who has the time to be stuck behind a computer in this era of modern technology? Check that the broker offers a mobile app or at least a responsive website trading platform.

Free Demo account

Check out the various demo accounts and the restrictions that apply to use them. Can you use it without making a minimum deposit and is it reloadable? Are you able to carry on using it to complement and enhance your trading skills?

Given the unknown quantity of external brokers and the restrictions of those available to them many people, when faced with a choice, will choose a local broker sadly missing out on some of the great offers available from international sites. Following our recommendations and reviews will ensure that you get a good trading experience whoever you choose to use.

Trader Broker Asset Profit

Broker Fees And Tax

USA law states any profits earned from binary options trading are subject to US tax. You must report the income as either capital gains or revenue to the IRS. If you are making a small amount, then the money can be declared as income; however, if it is a significant amount, then it must be reported as capital gains tax.

Of course, your profits can be offset by any losses so you must declare the overall income earned taking into account money lost. As brokers don’t fall under the same category as casino’s, they don’t have to send you a tax form, so it is the responsibility of the trader to ensure they declare the revenue in the appropriate tax year.

Aside from taxes, there are a few other small fees to consider:

    Deductions for the commission of successful trades which happens at source Broker fees for processing deposits and withdrawals using specific payment methods e-Banking platforms tend to charge a small commission for each deposit, and certain types of wire transfers will have costs associated with them Currency conversion fees if trading in a different currency

While these fees aren’t huge, it is worth shopping around for the best payment providers and option brokers that don’t charge fees for deposits and withdrawals. Consider making fewer but larger deposits or withdrawals to minimise the set fees.

American Licencing

While some questions surround binary option regulation and the legalities of trading we are here to remove any areas of uncertainty and provide you with fact-based knowledge. It is perfectly legal to trade binary options in the USA, and for traders to register with any broker, but it is illegal for offshore companies to solicit traders unless they have a Commodity Futures Trading Commission (CFTC) license.

Because of this difficulty of entering the USA market and the red tape surrounding it, many international brokers do not accept US traders with many leaving for countries like England and Cyprus.

Some big-name brokers are widely known and accepted and can save the trader from having to go looking for an appropriate offshore broker. There are also plenty of Commodity Futures Trading Commission (CFTC) licensed companies that are allowed to sign-up traders from the USA and are not deterred by the legislation.

Without spending time and effort in researching these companies, many people tend to stick with what they know. We, however, think that the choice should be there for you to make and so we use our expertise and experience to research the market and bring you the best binary options brokers that are licensed to trade in the US.

Exercise caution and make sure you choose a broker with reputable licensing and regulation.

How we Recommend Brokers

For US traders it can be a lengthy process finding an appropriate broker use. The legislation and regulations mean that you can’t just find one that you like the look of to open an account. Not only should you be comparing their offering to that of their competition but you need to check that all binary option brokers are licensed to trade in the USA.

We understand that you don’t have unlimited time to go through a long list of brokers to find the one that offers the best benefits to you then to see that they won’t accept your business. To help you and save you much time we have put together a list of recommendations to ensure that you find the best trading account for you without having to spend hours finding it.

It doesn’t matter what country we’re reviewing when it comes to binary trading; the USA gets the same treatment. Our recommendations and reviews cover many crucial points. These include the benefits such as great bonuses, the quality of the signals service, the usability and functionality of the trading platforms and the payouts on offer. We have a team of experts whose purpose is to investigate the offerings of all brokers to find the best US binary options broker and recommend them to you.

Frequently Asked Questions

Is binary trading in the USA legal and safe?

It is legal to trade a binary option, but it is illegal for any company to solicit business and trade unless they have a local license. In terms of safety, it is perfectly safe to trade with a reputable broker.

Do I need to pay fees and taxes on my profits?

The IRS requires all residents to declare their income and pay any taxes according to federal law. It is not the responsibility of the brokers to keep a record of traders’ deposits and withdrawals.

Can I test brokers before trading with real money?

A demo account is a crucial feature of any reliable and reputable broker. With a demo account, a new account holder can register and take advantage of this demo feature before they have to use their own money.

Is it easy to make deposits and withdrawals?

As long as you have a way to an initial deposit using a widely accepted debit card, then you can pay quickly. Withdrawals can take between 3-5 days, but some sites offer a quicker turnaround.

Can I trade using my mobile or tablet device?

Many good US brokers offer a reliable mobile site and an app for iOS and Android. If the broker that you are looking at doesn’t provide an excellent mobile service, then we say avoid them.

Jacob has been an author for us since our launch in 2020. He has over forty years’ experience in the financial sector and has held a variety of positions within financial services corporations and venture capitalist organisations.

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