I second the IEM and Blue Ripple recommendations and use both. Having said that, I have yet to find a Binaural encoder that works adequately with my ears and I've tried plenty of them. The best I've achieved with Binaural over headphones is better left / right externalisation but nothing really convincing front / back or up / down.
In fact, the only convincing Binaural recordings I've heard are the virtual barber shop and a few others created with the Neumann Binaural head (ku100 I think from memory).
In order for Binaural to be truly convincing, I'm suspecting I'd need to have a custom HRTF created for my ears and I don't have the funds for that.
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