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Day Trading Brokers and Platforms 2020
Compare the best day trading brokers and their online trading platforms to make sure you pick the most appropriate to your needs. Use the comparison of spreads, range of markets and platform features to decide what will help you maximise your returns. No single broker can be said to be best at all times for everyone – where you should open a trading account is an individual choice.
Here we list and compare the top brokers for day traders in 2020 with full reviews of their interactive trading platforms. So whether you are a forex trader or want to speculate on cryptocurrency, stocks or indices, use our broker comparison list to find the best trading platform for day traders.
How to Compare Brokers
Before you can find the best interactive brokerage for day trading you should determine your own investing style and individual needs – how often will you trade, at what hours, for how much money and using which financial instruments.
Then when choosing between all the top rated day trading brokers, there are several factors you can take into account. If you simply pick the cheapest, you might have to compromise on platform features.
There is no one size fits all when it comes to brokers and their trading platforms. The best brokerage will tick all of your individual requirements and details.
These are some of key points and areas to compare in this competitive market:
- Do they offer low commission rates? – As a day trader placing numerous trades intraday, low commissions over a long period will bolster your overall profit.
- Do they offer attractive margin rates? – If you can anticipate a return higher than the interest your paying on the loan, then generous margin rates will allow you to trade big with capital you don’t have to hand.
- Do they have a complicated fee structure? – Broker fees can rack up quickly. You need to look at the fine print to ensure you won’t get stung by hidden costs later down the line, such as when you want to withdraw your money. Having said that, the cheapest brokers for day trading usually make up that money in other areas, such as customer service.
- Will you need a minimum deposit?- Some brokers will require you to put down significant capital in order to open an account and start trading. For example, if you’re day trading at Interactive Brokers you’ll need to put down serious cash before you can get to work.
- Does the broker have a daily trading limit? – Some limits are imposed to protect against extreme volatility and market manipulation. But the Interactive Brokers day trading limit can be set by you to prevent you losing too much capital in one day.
- Do they offer different account types? – Different accounts will come with varying costs and attractive perks. For example, choose between Interactive Brokers day trading accounts and you can get lower commission fees, greater leverage and enhanced tools for technical analysis. Read more about Account types here.
Trading Platform Features
- Do they have high tech, informative tools for research and analysis? – You will need live price quotations, plus detailed charts and access to historical data will also help you trade smarter. The top 10 online brokers all offer a multitude of tools and resources.
- How quick and efficient is their order execution? This is massively important if you’re day trading, as just a few seconds could cost you serious cash. Whilst many virtual brokers offer real-time execution, there remains a slippage concern. This highlights the need to test drive your broker first.
- How user-friendly is their platform? – The trading platform provided by the broker needs to work for you. Most brokers offer several to choose from, some will tick the boxes for the average day trader, others will offer more advanced platforms for the veteran trader. Likewise, does it suit your hardware – is the platform compatible on Mac, PC, Linux, or whatever you use?
- Is there a Mobile platform? – It is rare for a broker not to deliver a mobile trading app, but the quality will vary. If trading on your mobile phone is important, then checking the apps compatibility (Android, iOS or Windows etc) will be vital.
- How good is their customer service? – Will you be able to quickly get in contact with someone when you need support or advice? This is particularly important if something goes wrong like a computer crash. Some brokerages offer 24/7 customer support, with call waiting times of less than one minute.
- Do they have a ‘dealing desk’? – The best brokers offer direct access. You don’t want to be sending an order to a train desk which then initiates it in the market. This is time-consuming and can result in re-quotes. By the time you’ve confirmed you want to proceed, your opportunity has probably vanished.
- Do they offer any attractive extras?– Any ‘Open Account’ promotions? £100 in free trades might not be everything, but it means you can iron out any creases in your strategy before it’s your money on the line. Trading without a broker means zero free credit for trial and error.
- Are there Account levels? Does a VIP account get free Level II data or reduced spreads?
- What returns do you get on your cash? – You’ll find you usually have something lying around in your brokerage account. Some brokerages won’t offer you a penny on that balance, but some will give you 3-5%.
- Trading Strategy – Can you implement your trading strategy, or even use automated trading, signals or copy trading at this broker?
Final Word On Comparing Brokers
Do your homework and make sure your day trading broker can cater to your specific requirements. It’s always worth giving your potential day trading broker a test. Set up a demo account, make sure you like the platform, and send off some questions to gauge how good their customer service is. Get this choice right and your bottom line will thank you for it.
Need a short cut? Check out the winners of the DayTrading.com Awards this year.
Use this table with reviews of trading brokers to compare all the brokers we have ever reviewed. Please note that some of these brokers might not accept trading accounts being opened from your country. If we can determine that a broker would not accept an account from your location, it is marked in grey in the table.
|Alpari||Yes||From $/£/€ 5||Yes||Yes|
|CMC Markets||Yes||£ 0||Yes||No|
|eToro||Yes||$200 ($50 in US)||Yes||No|
|Expert Option||Yes||10 $/€/£||Yes||Yes|
|Fusion Markets||Yes||No Minimum||Yes||No|
|InstaForex||Yes||$1 to $10 (Account choice dependent)||Yes||No|
|Pepperstone||Yes||£200 / $200||Yes||No|
|Skilling.com||Yes||100 £/€/$ or 1000 NOK, SEK||No||No|
|ZuluTrade||Yes||$1 to $300 (Broker choice dependent)||Yes||No|
What is a Trading Platform?
The trading platform is the software used by a trader to see price data from the markets and to place trade orders with a broker. Market data can either be retrieved from the broker in question, or from independent data providers like Thomson Reuters. In this section, we detail how to pick the best trading platform for day traders
Normally a broker will offer their customers a branded trading platform that’s more or less unique to that individual broker, but there are also independent platforms that can connect to multiple brokers. An independent platform can be a good choice for the experienced trader, while using a broker’s own platform is the easiest way to get started for beginners.
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How an Independent Trading Platform Works
Trading Platform Features
The best day trading platform will have a combination of features to help the trader analyse the financial markets and place trade orders quickly. In particular, a top rated trading platform will offer excellent implementations of these features:
- Access to current and historic market data – A day trader needs to be notified of market price changes as soon as possible to be able to act before an opportunity is gone or a loss is materialised. Historic data is necessary for technical analysis and backtesting of trading strategies. Not all platforms have a backtesting feature though, so check before you commit to a specific software.
- Charting and other visual aids – Trends and market sentiment are best visualised through different charts and plotting of relevant technical indicators.
- Order execution – Once you have decided to place a trade, it needs to be executed on the market immediately. A great platform and broker will execute in less than a second. Traders that use automated trading want even faster execution, usually counted in milliseconds, depending on the strategy used and how price sensitive it is.
- Automated trading – A platform that offers automation capabilities enables a trader to make market moves even if he/she is not at the computer at the time. The classic “stop loss” feature is a simple form of automation, but there are much more advanced platforms that enable you to program your own trading robot to carry out elaborate strategies or to react much faster than you can do yourself.
- Broker Independence (optional) – You might want to become an expert on all the features of your trading platform but still have the option to change which broker you use. The solution is an independent trading platform (listed below), that can connect to several different brokers.
Independent Trading Platforms Comparison
An independent trading platform is used for visualising market data and managing your trading, but it needs to connect to one or more brokers to actually place a trade on the market. These professional day trading platforms typically offer a more advanced interface than that of the average brokerage, and help you to find and place trades with one or more brokers of your choosing. Using an independent trading platform you don’t have to relearn a whole new software just because you change to a different broker.
Independent platforms often come with advanced features such as enhanced charting and pattern analysis, automated trading and trading alerts/signals. Different platforms have different strengths. NOTE – Not all brokers support this kind of integration with independent platforms, so use our reviews to find ones that do.
When choosing between brokers you also need to consider the types of account on offer. For example:
- Do they offer cash and/or margin accounts?
- Can you get managed accounts?
- Do they offer a single standard account or do they offer different account levels?
The account that is right for you will depend on several factors, such as your appetite for risk, initial capital and how much time you have to trade. With that said, below is a break down of the different options, including their benefits and drawbacks.
Most day trading brokers will offer a standard cash account. This is simply when you buy and sell securities with the capital you already have, instead of using borrowed funds or margin. Most brokers will offer a cash account as their standard, default option.
There are several benefits to cash accounts. Firstly, because there is no margin available, cash accounts are relatively straightforward to open and maintain. Also, you have less risk than margin accounts because the most you can lose is your initial capital. Finally, you don’t have to pay the interest costs that come with margin accounts.
Trading with a cash account also means you have less upside potential because there is no leverage. For example, the same gain on a cash and margin account might represent a 50% difference in returns because margin accounts require far less capital.
In addition, you have to wait for funds to settle in a cash account before you can trade again. At some brokers, this process can take several days.
Overall then, the absence of margin means these accounts probably aren’t the right fit for the majority of active intraday traders.
Most brokers will offer a margin account. Essentially, this allows you to borrow capital to increase your position size. For example, you may only pay half of the value of a purchase and your broker will loan you the rest.
Note brokers often apply margin restrictions on certain securities during periods of high volatility and short interest.
Margin accounts come with several benefits. Firstly, you can choose when you pay back your loan, as long as you stay within maintenance margin requirements. Secondly, you can leverage assets to magnify your position size and potentially increase your returns.
Also, interest rates are normally lower than credit cards or a bank loan. Finally, if you have a concentrated portfolio, you may be able to use existing securities as collateral for a margin loan.
Despite the benefits, there are serious risks. With a cash account you can only lose your initial capital, however, a margin call could see you lose more than your initial deposit. You also have interest charges to factor in.
In addition, you need to check maintenance margin requirements. If not, you could get short-squeezed resulting in forced liquidation from a margin call.
Overall then, margin accounts are a sensible choice for active traders with a reasonable tolerance for risk.
Managed Trading Accounts
Some brokers will also offer managed accounts. A managed account is simply when the capital belongs to you, the trader, but the investment decisions are made by professionals. These might be referred to as an advisor on the account – these advisors have complete control of trades. There are two standard types of managed accounts:
- Pooled Funds – With this type of account your capital goes into a mutual fund along with other traders’ capital. The returns will then be distributed between the investors. Normally, brokers divide these accounts according to risk appetite. For example, those looking for large returns may put their funds into a pooled account with a high risk/reward ratio. Those looking for more consistent profits would probably opt for a safer fund. Minimum investments for pooled accounts are around $2000.
- Individual Accounts – With this account, your broker will manage your capital individually and make investment decisions tailored to your needs. The main benefit is having an experienced professional on your side. However, you will pay for that privilege with account maintenance fees and commissions. In addition, some brokers will impose high minimum investments of at least $10,000.
Overall, managed accounts are a good fit for those who have significant capital but little time to actively trade. However, those with less capital and those with time or the inclination to enter and exit positions themselves may be better off with an unmanaged account.
Some discount brokers for day trading will offer just a standard live account. However, others will offer numerous account levels with varying requirements and a range of additional benefits.
For example, a Bronze account may be the entry level account. Here you may get access to chat rooms, a weekly newsletter and some financial announcements and commentary. These entry-level accounts normally have low deposit requirements.
If you were to deposit more, say over $1000 and make a certain number of trades each month, then you may be eligible for a Silver account. This may grant you access to courses, a personal account executive and more in-depth market commentary.
Deposit a bit more, $5000 for example, and you may be eligible for a Gold account. For this you could get:
- 10% deposit bonuses
- Daily market research
- Referral incentives
- A dedicated trading mentor
- Telephone access to an active trading community
Finally, some brokers will offer a top tier account, such as a VIP account. To qualify for this account you might need to deposit upwards of $20,000. You may also need to trade 500 lots quarterly, for example.
However, for your larger deposit, you might get even more hands-on help, as well as greater deposit bonuses, free trades and other financial incentives. You may also get full access to a wide range of educational and technical resources.
So, the best day trading discount brokers will offer a number of account types to meet individual capital and trade requirements. It’s also worth bearing in mind that generally, the more you can invest the greater the perks and trading experience.
Final Word on Accounts
When choosing between brokers, you need to consider whether they have the right account for your needs. The main factors to consider are your risk tolerance, initial capital and how much you will trade.
Note you can also open different accounts if you want to use several different strategies.
Regulation And Licensing
One key consideration when comparing brokers is that of regulation. There are a number of different regulatory bodies around the world. Reputation of these authorities varies, but almost all can give consumers a high level of confidence in the brokers they license. Here are some of the leading regulators;
FCA (Financial Conduct Authority) – UK regulator, with responsibility for all forms of trading and market speculation.
CFTC (Commodity Futures Trading Commission) – US Regulator overseeing broker.
SEC (Securities and Exchange Commission) – US regulator for exchanges and markets.
FSB (Financial Services Board) – South African Regulator
CySEC (Cyprus Securities and Exchange Commission) – Cypriot regulator, often used to ‘passport’ regulated brands across Europe
BaFin (The Federal Financial Supervisory Authority / Bundesanstalt für Finanzdienstleistungsaufsicht) – German regulator
Financial Supervisory Authority Denmark (Finanstilsynet)
The European Securities and Markets Authority (ESMA) also offers an over-arching guide to all European regulators, imposing certain rules across Europe as a whole – including leverage caps, negative balance protection, and a blanket ban on binary options. These rules only apply to retail traders, not professional accounts.
How to Try a Broker for Free
A demo account is a great way for beginners to practice trading and test a broker or trading platform without using real money. A demo account is funded with simulated money, so you can try out the broker’s platform features and get familiar with acting on the markets. A warning though – even the best practice platform can’t replicate the pressures that comes with having real money on the line, but it’s a great way to learn the basics and get started with zero risk.
How Brokers Make Money
Even among the best brokers for day trading, you will find contrasting business models. Having said that, there are two main types:
- Market Makers
- Over-the-counter (OTC) brokers
Some of the best brokers for day trading online are market makers. Market makers are constantly ready to either buy or sell, so long as you pay a certain price. That means they may lose out in price shifts before they find a buyer/seller.
But, of course, for taking that risk, they seek compensation. So they set the bid price marginally lower than listed prices while setting the ask price slightly higher. That tiny margin is where they will make their money.
Now that may seem like an insignificant amount. However, tens of thousands of trades are placed each day through good brokers for day trading that use these systems. Unsurprisingly, those minute margins can quickly add up.
Note day trading brokers using this model normally offer either fixed or variable spreads:
- Fixed spreads – Do not change, regardless of what is happening in the markets. Due to the additional risk, fixed spreads tend to be wider than variable spreads.
- Variable spreads – Fluctuate in response to market conditions. For example, during the London and New York overlap, an increase in liquidity leads to tight spreads.
Let’s take a look at an example – if you want to sell 50 shares of Tesla, good market makers will buy your shares, regardless of whether they have a seller lined up yet. However, they may buy those Tesla shares for $300 each (the ask price), while offering to sell them to another trader for $300.05 (the bid price). That $0.05 is where your online broker is making their money.
Many of the best discount brokers for day traders follow an OTC business model. In fact, they are the most popular type of day trading broker. The immediate lure is the apparent lack of trading costs and commissions. However, on the best day trading platforms, it isn’t quite that simple.
Essentially, an OTC day trading broker will act as your counter-part. They will take the opposing side of your position. As a result, you don’t have to pay a commission or fees in the same way. You are simply trading against the broker.
The best OTC futures or CFDs brokers, for example, may have both sides of the trade covered, promising a handsome margin. However, some of best brokers for day trading may also hedge to offset risk.
There are several key differences between online day trading platforms that utilise these systems:
- Increased liquidity – Effectively the best brokers that follow the market maker model act as wholesalers, buying and selling to meet the needs of the market.
- Costs – Without market makers, finding buyers and sellers may take longer. As a result, liquidity may drop and you may pay higher trading fees as entering and exiting positions becomes harder.
- Motivation – A market maker will make money regardless of the outcome of your trade. Whereas an OTC broker has a vested interest in you losing out.
The top brokers for day trading will often use a variation of one of these models. Check reviews to see which model a prospective broker is using to get a feel for where and how they expect to make their profit.
Broker Payment Methods
Different trading brokers support different deposit and withdrawal options. The availability of one or more specific payment methods can be of importance to traders, as fees and transit times vary between methods. For some traders it might be essential that a deposit or withdrawal is instantaneous, while others are fine with a processing time of a few days. Any trader making frequent deposits or withdrawals surely wants to look out for low transaction costs. Below we list different payment methods, which brokers support them along with tutorials covering everything a trader needs to know.
Trading In Different Regions
With the world migrating online, in theory, you could opt for day trading brokers in India or anywhere else on the planet. However, there are tax considerations and regulations worth keeping in mind before you choose day trading platforms in Australia, Singapore or anywhere outside your country of residence.
- Tax considerations – Where you trade and where your broker is situated may affect what type of tax and how much tax you will have to pay. Will you pay capital gains tax? Will you pay net income tax? If you start day trading with brokers from Canada, will you pay tax abroad and domestically? If you’re thinking of signing up with a far afield broker, find out the tax ramifications first.
- Regulation – Regulation is important for a number of reasons, but your financial security is one of them. Opt for brokers regulated in well established financial systems, like the EU, USA or UK. A broker regulated in Bermuda is better than no regulation at all, but you may still encounter issues.
Canada and the US also have pattern day trading rules – but both are quite separate. Read more about this on the rules page. Just note that Canadian day trading platforms may differ significantly from both US or European versions, and platforms in South Africa will vary also.
The broker you choose will quite possibly be your most important investment decision. Everyone’s requirements are different so there is no clear universal winner to turn to. Instead, in your comparison, consider which of the factors listed above are most important to you and then you’ll be able to find the best broker for your needs.
For Specific Countries
Market Impact of Coronavirus
Trading Brexit News is trending
Cryptocurrencies like Ripple and Bitcoin see a lot of volatility currently.
Binary Options Brokers and Platforms – Reviews and Comparison
We have compared the best regulated binary options brokers and platforms in April 2020 and created this top list. Every broker and platform has been personally reviewed by us to help you find the best binary options platform for both beginners and experts. The sortable broker comparison list below shows which binary trading sites came out on top based on different criteria.
You can sort the list using payout (maximum returns), minimum deposit, bonus offers or if the operator is regulated or not. You can also read full reviews of each broker, helping you make the best choice. Below the comparison list is some advice on how to pick the best trading platform for you, as this will often come down to your personal requirements and needs.
Top Brokers in Russia
|Spectre||$10 (ETH)||Up to 200%*||» Visit|
|OptionField||$5||93%||Pro Account Discount and 10% Cashback||» Visit|
|Nadex Exchange||$250||100%||» Visit|
|RaceOption||$250||90%||100% Deposit match bonus||» Visit|
How to Compare Brokers and Platforms
In order to trade binary options, you need to engage the services of a binary options broker that accepts clients from Russia. Here at binaryoptions.net we have provided a list with all the best comparison factors that will help you select which trading broker to open an account with. We have also looked at our most popular or frequently asked questions, and have noted that these are important factors when traders are comparing different brokers:
- What is the Minimum Deposit? (These range from $5 or $10 up to $250)
- Are they regulated or licensed, and with which regulator?
- Can I open a Demo Account?
- Is there a signals service, and is it free?
- Can I trade on my mobile phone and is there a mobile app?
- Is there a Bonus available for new trader accounts? What are the Terms and
- Who has the best binary trading platform? Do you need high detail charts with technical analysis indicators?
- Which broker has the best asset lists? Do they offer forex, cryptocurrency, commodities, indices and stocks – and how many of each?
- Which broker has the largest range of expiry times (30 seconds, 60 seconds, end of day, long term etc?)
- How much is the minimum trade size or amount?
- What types of options are available? (Touch, Ladder, Boundary, Pairs etc)
- Additional Tools – Like Early closure or Metatrader 4 (Mt4) plugin or integration
- Do they operate a Robot or offer automated trading software?
- What is the Customer Support like? Do they offer telephone, email and live chat support – and in which countries? Do they list direct contact details?
- Who has the best payouts or maximum returns? Check the markets you will trade.
We cover as many of these comparison factors as possible in our list above, but we go into much more depth within each review.
Regulated Binary Brokers
Regulation and licensing is a key factor when judging the best broker. Unregulated brokers are not always scams, or untrustworthy, but it does mean a trader must do more ‘due diligence’ before trading with them. A regulated broker is the safest option.
|Binary.com||Malta GA||BO, CFD|
|IQ Option||CySEC||BO, CFD, Crypto, Forex|
|BDSwiss||CySec||BO, CFD, Crypto, Forex|
|24Option||CySEC||BO, CFD, Crypto, Forex|
|Nadex Exchange||CFTC||BO, Forex|
Leading regulatory bodies include:
- CySec – The Cyprus Securities and Exchange Commission (Cyprus and the EU)
- FCA – Financial Conduct Authority (UK)
- CFTC – Commodity Futures Trading Commission (US)
- FSB – Financial Services Board (South Africa)
- ASIC – Australia Securities and Investment Commission
There are other regulators in addition to the above, and in some cases, brokers will be regulated by more than one organisation. This is becoming more common in Europe where binary options are coming under increased scrutiny. Reputable, premier brands will have regulation of some sort.
Regulation is there to protect traders, to ensure their money is correctly held and to give them a path to take in the event of a dispute. It should therefore be an important consideration when choosing a trading partner.
Both sign up bonuses and demo accounts are used to attract new clients. Bonuses are often a deposit match, a one-off payment or risk free trade . Whatever the form of bonus, there are terms and conditions that need to be read.
It is worth taking the time to understand those terms before signing up or clicking accept on a bonus offer. If the terms are not to your liking then the bonus loses any attraction and that broker may not be the best choice. Some bonus terms tie in your initial deposit too. It is worth reading T&Cs before agreeing to any bonus, and worth noting that many brokers will give you the option to ‘opt out’ of taking a bonus.
Using a bonus effectively is harder than it sounds. If considering taking up one of these offers, think about whether, and how, it might affect your trading. One common issue is that turnover requirements within the terms, often cause traders to ‘over trade’. If the bonus does not suit you, turn it down.
Binary options demo accounts are the best way to try both binary options trading, and specific brokers’ software and platforms – without needing to risk any money.
You can get demo accounts at more than one broker, try them out and only deposit real money at the one you find best. It can also be useful to have accounts at more than one broker. For example, payouts for two different assets might be best at different brokers. You can shop around, and use whichever account has the best payout for that asset.
Demo accounts offer the best way to try out a brand, risk free. Likewise if we recommend a brand, you can try it first, before risking anything.
Low Minimum Deposits
If you are looking to get involved with binary options for the first time, low minimum deposit requirements may be of interest. For traders just looking to try binary options, a low minimum deposit broker might be best. A small initial deposit keeps risks low. Minimum deposits start at just $5 and there are a growing number of brokers offering low minimum deposits – “low” would be any minimum under $50.
Likewise, all brokers will have a minimum trade requirement or trade amount too. These can vary greatly between platforms. Minimum trade figures range from $1 to $25 – which is a large difference if a trader plans to trade frequently. For some traders, this might be less of a factor in terms of finding the best broker for them, but for others it will be very important. Practice accounts are a zero risk way of learning to trade.
One element many traders use to find the best binary options trading account, is the payout percentage on offer. This is not always a simple comparison however. Payouts will change based on the underlying asset being traded, and the expiry time of the option. In addition, payouts will change as the broker manages their own risk. So if one broker was originally the best price, things may then revert and mean that another now has the top payout.
So the most an investor can do, is to check the payouts for assets, and expiry times they are most likely to make, and judge which brand offers the best terms most often. Demo accounts are good when researching payouts on specific assets and trades.
Exchange traded and over the counter brokers will have different payouts – and they will not be easy to compare. In general, exchange traded options offer superior value. Nadex are one example of an exchange.
So as you can see, finding the best trading account and broker is not always easy – but it is worth noting that you are free to move between brokers whenever you like. So even if an account turns out to be poor, it is easy to up sticks and find a new trading firm. Likewise, a trader could have multiple accounts, and open trades at the broker with the best terms for that particular trade.
Which is the Best Binary Trading Platform?
Naming the best trading platform is not easy, simply because trading platforms and proprietary (bespoke) software are normally a question of personal taste. One user might like a simple layout, while others might need a lot of data on screen all the time.
However, platforms do have different levels of quality, both in terms of ease of use, and features. Broadly speaking, brands which offer Contracts for Difference (CFDs) in addition to binary options, deliver a more feature-rich trading platform or advanced software.
So the likes of Nadex and IQ, will deliver a very professional trading platform. MetaTrader integration is also normally provided at the more professional brokers (Some use both mt4 and mt5 functionality) . This difference in quality is evidence of the maturity of binary options as a product, but binary brands will catch up very quickly.
Intro To The IQ Option Platform
How do Brokers Make Money?
Binary options brokers make money via one of two business models:
- As a counter-party, ensuring an ‘over round’ via payout percentages. Known as ‘Over the counter’ (OTC)
- Via a spread or commission on an exchange traded model
People who have experience of other forms of trading, and are now approaching over-the-counter (OTC) brokers for the first time may find themselves asking the question: “Where is the commission?”.
With OTC binaries however, there is no commission. In theory, the term ‘brokers’, is not correct. Binary firms are not arranging a deal or acting as a middleman, or as a market maker; What they are, is the counter-party to each of their customers’ positions. So there is no fee or commission for the trade. Instead, each customer is essentially betting against the house. Where brokers have both sides of a trade covered, they have a handsome margin. Where they do not, the payout still gives them a level of protection. In certain circumstances, the broker will also hedge it’s own position to mitigate risk.
Those companies (Nadex, for instance) that trade binary options via an exchange operate much more like a ‘broker’. Unlike the OTC market where the platform is the counter party, with exchange traded options, the broker is the middleman – matching buyers with sellers and charging a commission. This charge is normally hidden within the spread, rather than an explicit cost. There is far less risk involved for the broker, and therefore generally better returns per trade for the trader. Brokers can be actively compared using the spread – the tighter the spread (difference between buy and sell prices) the cheaper it is to trade.
Brokers using the spread model often also offer leverage, or trading on ‘margin’ via their software. This increases the trade size for the trader – and profit for the platform.
Should You Use Multiple Brokers?
There are some very good arguments for having more than one binary trading account:
- Brokers suit certain trades. Different brokers will suit different trading styles, or trade types. So one broker might be excellent for shorter term trade types, and have great payouts on forex pairs. But that same brand may be slightly less good when it comes to offering boundary trades or indices payouts. If a rival had a full set of long term expiries with great payouts, and lots of choice of boundary trades – it makes sense to have accounts with both platforms, and place trades with the broker that offered the best deal for each trade.
- Demo accounts. Multiple demo accounts makes perfect sense – you want to try as many brokers and trading platforms as possible before deciding where to trade.
- Reduce risk. Accounts at more than one broker protects you from any issues with a particular firm. From issues as serious as insolvency, to smaller things, like website downtime, software issues or a market being closed – multiple accounts reduces your risk of being affected by any hardship a broker might face.
- Multiple offers. Each sign up can mean a new bonus, so it might be worthwhile taking up more than one account to receive all the offers. As ever, read the terms – and also note that on occasion, larger deposits might mean larger bonuses – so splitting them may not be the best choice.
- Spread winnings. Some brokers may look for winning traders on their books, with a view to restricting their trading, perhaps limiting trade size – or worse. While this threat is thankfully small, multiple accounts means spreading the winnings out. Most brokers will search for “winners” based on total profit rather than strike rate, so hiding the volume across broker accounts can help you stay below their radar.
Exchange versus OTC (Over the Counter) Brokers
A broker that offers an exchange is much closer to a traditional ‘broker’ than OTC brokers. An exchange performs the job of ‘middleman’. They will match a seller of an asset, with a buyer of the same asset, and charge a commission for putting the deal together. The market itself will decide the prices – if there are more sellers than buyers, the price will drift down until demand rises. If there are more buyers than those willing to sell, the option price will rise.
A broker operating an exchange does not mind who wins and who loses. They take no risk on the trade themselves (unless the traders are trading on credit). The broker will make their commission on the trade regardless of the outcome.
Due to this reduced risk for the broker, the returns for a winning trader are generally larger. Commissions are usually small relative to the size of the trade, meaning they do not impact the payout too much. Other benefits include the fact that stop losses can be applied, and also that trades can be closed at any time (to take a profit or reduce losses).
The complications with exchanges, comes from the structure. An exchange traded binary option will “trade” somewhere between 0 and 100. Where 0 is the figure used where an event did not occur, and 100 where it did. If the current price is currently 30, a ‘buyer’ would risk 30 times his trade size, to potentially win 70. A ‘seller’ therefore, would risk 70 to win 30. While not a complicated equation, it is slightly more complex than the straight forward over the counter option.
OTC (Over The Counter) Brokers
The most common type is the Over the counter (OTC) broker, but this type of firm is not really a ‘broker’ at all strictly speaking. They are the counter-party to one side of the trade. So where a trader opens a position, the broker will win or lose money, based on whether the trade wins or loses. Only where the broker has another trader who has made the exact opposite trade, will they have assured profits.
Due to this increased risk, the brokers will offer a lower payout which mitigates some of the risk they are taking. It is therefore likely to be lower than an exchange traded broker. Some firms will also have built in ‘hedging’ mechanisms to reduce risk further. In some cases, one side of trade might be made unavailable if liabilities get too large.
The simplicity of binary options is retained with OTC brokers. They have also made great strides in competing with exchanges by offering ‘cash out’ values for options, allowing traders to close positions early, and set up stop losses. Once those features become common the gap between OTC and exchanges will get smaller. For now, traders are better off trading on an exchange – but might be advised to learn the differences via demo account.
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Deposit and withdrawal options do vary at each brokerage. Each of our reviews will explain which each firm offer, but below is a list of the most common options.
If you are looking for brokers that support a specific payment method:
- Wire Transfer
- Credit cards / Debit cards
All of the factors covered above will ultimately affect the way a trader plays the market, and therefore, their profitability. The ideal situation is to get a binary broker that offers:
- Several financial assets spread across several markets
- Offers a reasonable bonus with a good payout approaching 90%
- Offers flexible expiration dates without boxing traders into very long expirations.
Trading using a broker’s platform will only be enjoyable, and profitable, if you are using a reputable operator. You also need to choose one that suits your trading style best – only you will know what that is. Read the above binary broker reviews carefully before making that crucial trading decision, but remember you are not tied in to any single broker, and can pick and choose.
Compare Options Brokers in the UK
Use our comparison tables to compare the best UK based options brokers authorised and regulated by the FCA. Choose or switch to an option broker that offers the most markets, best pricing and client security.
Options trading carries a high level of risk and can result in losses that exceed your deposits. Featured brokers appear first.
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