The financial stability of a binary options broker says a lot about how well-qualified they are to manage funds and pay out profits. Among the greatest concerns of traders is whether or not their funds are secure. Should a broker find themselves in a position to not issue payments as promised, they could be forced to close their doors. While you may never know the exact amount of money that a broker has stored away, there are ways in which to determine how stable a broker actually is in regard to finances.
One way in which to learn more about brokers is to read reviews. Reviews rarely mention financial stability, but they can tell you how long a broker has been in operation and whether or not withdrawals are being processed and paid as agreed. Forum posts may or may not be helpful, as new traders often expect to receive their withdrawal immediately, when the fact is that total withdrawal time can take up to two weeks. False scam reports are unfortunately quite common.
Another factor to consider is the return rates being offered by the broker. These should be reasonable, ranging between 65% and 85%. Profits which are too good to be true can be viewed as a warning sign. However, there are higher risk trades which do carry return rates that greatly exceed the average amounts. Since these do carry more risk, brokers can offer them without the concern o having to pay out a huge amount of winnings. The bottom line is that a broker needs to be profitable and payout rates that are consistently higher than average could be a red flag.
What about younger brokers?
There could be some reason for concern when a broker has not been in operation for an extended period of time. These brokers could be good as good as any other, even better, but determining that can be tough. In this case, finding out whether or not the broker is regulated can help. While not every solid binary options broker is regulated, it may be wise to err on the side of caution when a broker has been in operation for less than one year.
Do feel free to ask questions about financial stability. One of the hallmarks of a great broker is excellent customer service. Reps may not be able to answer direct questions in regard to finances, but they should be able to answer questions regarding where funds are held and whether or not trader payments are indeed kept in a segregated account. Even when regulation is not in place, trader funds should held in reserve for future payments.
Do not be overly concerned if a broker is not willing to tell you the exact amount of funds that they have on hand. This is sensitive information that they are not obligated to provide to traders (but are typically required to provide to regulatory authorities). To minimize risk, use the aforementioned methods to determine whether or not there is any room for concern about the financial status of each binary options broker you may be considering trading with.