Binary Options Broker Scam
This is a pretty hot subject and this debate has been going on for spot Forex brokers for many years and still is. Spot Forex has been and is still a bit finicky business and it is not surprising that the same questions that arose within the spot Forex community, now arise within the Binary Options community. Trading is not as easy as it is marketed by the brokers, that’s for sure. Trading is a business and if you have trouble with this notion then you will have very little success. You cannot trade on a whim, in other words gamble, and think you can rake in the cash.
Are the Binary Options Brokers really scamming us?
I personally think the vast majority of the Binary Options brokers have sound business practices, up to a certain extent at least. As with any business, they are in it for a profit and I am sure you would be as well. Further all businesses have customers that are not satisfied for some reason or other. Usually the problem is that the expectations on the part of the customer was higher than what the product delivered. Everyone of us have bought a product that didn’t meet expectations. That doesn’t mean that company is a scam, does it? It just means you were expecting something different to what you got. Of course there are various aspects to this – it could be low quality or lack of features etc. Usually it boils down to a price/value distortion for normal products. For brokers it’s a bit different because the product is not tangible and very much abstract. The product the brokers offer can be compared to Rubik’s Cube if you like. If you can not solve it doesn’t mean it’s broken, right? It means you don’t possess the skills to solve it, nothing more, nothing less. Would you return such an item? I am sure some would and perhaps that’s where the problem lies, at least a part of it.
Binary Options Brokers and Marketing
Having said that let’s look at the brokers and their marketing schemes and the troubles they create. I am not going into the marketing practices they are using selling Binary Options as something that is easy. It’s not, although it certainly is easier than trading, say, spot Forex. I think the biggest problem Binary Options traders have with the brokers are related to the deposit bonuses they are using to lure in new clients. As these deposit bonuses are very juicy it wouldn’t surprise me if some brokers automatically add such bonuses to the traders accounts the moment he makes his deposit. You might ask what is the harm in that? Well, if you have ever read the Terms & Conditions of these deposit bonuses you would understand that it’s very bad business practice to automatically force upon a trader such a bonus. Let’s look of the Terms & Conditions from VIPBinary:
VipBinary offers a number of attractive reward features to its new and regular customers. Bonuses and one time trading credits rewarded to customers are part of VipBinary’s promotions program. These bonuses are limited time offers and the terms and conditions associated with any bonus rewards are subject to change.
In order to withdraw your full bonus, you will be required to execute a minimum trading volume of 30 times for every $1 bonus. The bonus can only be withdrawn when the preceding stipulation has been fully met and fulfilled.
The withdrawal of funds from an account before completing bonus conditions will immediately nullify the bonus and will be removed from the account.
Any indication of fraud, manipulation, cash-back arbitrage, or other forms of deceitful or fraudulent activity based on the provision of the bonus will nullify the account and any and all profits or losses garnered.
Read the text highlighted in red. What this means is that for every dollar you receive in bonus you have to trade it 30 times. Let’s take an example to make it more digestible. You deposited $1000 and then accepted a bonus of 50% or $500. Wow, you think, they just gave me $500, cool. Not so fast! To be able to withdraw your winnings or remainings of your capital, you first have to generate a turnover of 30 x $500 = $15000. If you are trading $100 lots that means a massive 150 trades before you see any of you trading capital or winnings. That will take a long time to achieve. If you make 4 trades a day, that amounts to almost 2 months of trading, day in and day out. As you can understand, some might get very upset by such deposit bonus terms.
If you accepted such a bonus without reading the Terms & Conditions, the broker has no fault. It’s your responsibility to read the fine print. On the other hand, if the broker deposited a bonus in your account without your consent, he is to blame and should promptly lift any restrictions on on withdrawing you capital.