Reading the online reviews about brokers is a good way to see who is legit. Most of the forums online will post genuine reviews of brokers they have worked with. Will these reviews keep you from getting fleeced by a potential broker? Only if you know how to read between the lines. Most reviews are not going to come right out and say it. The reviewer will leave carefully placed words. If you know how to spot these words, you can avoid getting scammed.
What types of scams should you be looking out for?
THE CHURNING METHOD
This is when the broker will use excessive techniques with your trading options. Make no mistake, this is bad. The broker doesn’t really care about you or your finances. He or she is just looking to add more money to his or her bank account. There isn’t any real benefit to this, except the increase in the commission. Your broker makes a tidy commission on every account transaction, which takes place. Sounds simple, right?
What should you look out for? If you see lots of activity coming from your broker’s end, but there is no real payoff from your end, then he or she is churning.
Read some of the reviews to find the best binary options brokers that interest you. If the word churning is used just once, it’s a bad sign.
This is another route that some brokers take. Your broker will convince you to take advantage of an upcoming dividend. What the broker is trying to do is make an easy profit. Say, for example, there are shares being sold at $100. The dividend price being offer is about $2. In this situation, the broker would tell the client to buy it, just to make a $5 return on the investment.
Truth be told, the investor won’t make any money on it at all. He or might make some short-term cash, but it’s going to become a tax liability later. This tax liability is something the broker escapes from. The broker makes a nice profit and the investor is left to clean up the mess.
If you see dividend selling mentioned in any of the reviews, please stay clear of this broker. He is not looking out for your best interests; he only cares about using you. Some brokers do this. They use their clients to fatten their wallets some more.
Stay clear from brokers like this.