That’s a question we often ask ourselves before deciding to trust a broker with our money. Of course, any trader would like to have the best of both worlds – regulation and reputation, but unfortunately that’s not always possible on today’s Binary Options scene, hence the dilemma: Regulation or Reputation? What should a trader choose? My initial impulse would be to say: Go for regulation and don’t even think about trusting an unregulated broker with your money. But… is regulation a guarantee of fair practices? Let’s see…
The Early Days of Binary Options
When Binary Options were introduced to the large public, back in 2008, nobody even thought about asking for regulation. Ah, shady brokers had such an easy time getting their hands on clients’ money: all they had to do is promise high returns, low risk and people would throw money at them “Here, take my money!!! You want some more? Ok, I’ll loan some more and I’ll give it to you and I’ll get rich”. Everybody was blinded by the bright lights of “Make 85% profit in as little as 60 seconds” and questions like “Are you Regulated?” or even “Who really owns this company I’m about to invest 1000 bucks in?” were too much to ask. Next thing an account manager takes over your trading, allegedly guiding you and teaching how to become a real trader, a professional. But the only problem is this supposedly professional trader doesn’t know that much about the market or doesn’t really want you to succeed and your account shrinks like an ice cube in Sahara. Inevitably, you are asked to deposit more and you comply because the dream of quick, easy riches is still so vivid in your head you can almost touch that promised truckload of money. Unfortunately the story repeats over and over again and if you somehow manage to make money, withdrawals never hit your bank account and you are fed all the bull5h1# excuses possible.
That’s how it was back then, but what has changed? First of all, the people’s attitude is different. They are more careful with their money and this translates into a better service offered by brokers. A lot more people started to ask the proper questions like “Are you Regulated” and if the answer was No, they would go look for a regulated broker. People started to read reviews and to compare brokers in order to get a feel of their reputation. This determined brokers to be a lot more careful about the way they do business and to take their game to the next level: improvement. That’s a good thing for sure, but traders still face a dilemma: what if a broker is not regulated but has a very good reputation? Regulation beats Reputation or vice-versa like in a game of Rock – Paper – Scissors?
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Shady Regulation and Rotten Reputation
Sometimes just regulation is not enough because it doesn’t guarantee 100% protection against broker misconduct. Some brokers get regulated just to be able to get more clients and then the whole smoke and mirrors show begins. For example, a company is regulated and they open ABCoptions.com; a few months later, they open DEFoptions.com and XYZoptions.com. Can I assume the last two brokerages are regulated as well and can I trust them completely? Do they operate as regulated entities just because they are owned by a regulated company? And what if the company is regulated by CySEC (Cyprus) but they open a brokerage in Hong Kong where CySEC has no jurisdiction? So many questions… too many if you ask me and this type of shady regulation is equal to zero in my book. If it’s not crystal clear, I’d stay away.
Then we have the Reputation conundrum: some brokers are well known and benefit from the trust of tens of thousands of traders around the world… but they are not regulated. Does that mean I have to dismiss them right from the start? No way. After all, I’d take a good reputation over a shady regulation any day of the week. But this reputation can go rotten fairy quick.
A Friend in Need Is a Friend Indeed
The thing is that I cannot give you a general answer regarding which one is better: Regulation or Reputation as each case must be treated individually. But the good news is that I know someone who can: binaryoptionsthatsuck.com. These guys will tell you which brokerage you can trust, whether it’s regulated or has a good reputation. Regulation doesn’t mean much if it’s not backed up by a solid reputation and sometimes just a good reputation is enough, in which case reputation beats regulation, but still… Oh, I’m starting to confuse myself so I think I’ll just follow my advice and go to binaryoptionsthatsuck.com to clear up the fog. They’ll help me choose a broker!
About the Author – Martin Kay
Martin is a Forex trader and coach, guest blogger, binary options enthusiast, Chief Editor and Co-Founder of BinaryOptionsThatSuck.com based in Cape Town South Africa. Established on 2010, Binary Options That Suck is devoted to scam exposing and educating traders. The team shares efforts to clear the industry out of crooks, build trust between clients and brokers and to help newbies joining the industry alongside the BOTS community members. It is the website’s goal to help the industry become more transparent; I would like to take this opportunity to thank globalbankingandfinance.com for helping us in our cause.