In this article, we are going to discuss the benefits of working with a regulated forex broker. Since there is no centralized body that oversees the forex trading market, many countries now have independent and government bodies that have been tasked to supervise currency trading in their jurisdictions. These supervisory agencies regulate foreign exchange market by setting standards which all financial investment firms and forex brokers operating under their jurisdiction must comply with.
These standards ensure that all parties involved in Forex or CFD trading are subjected to fair and ethical financial practices. Regulatory bodies also issue license to brokers that meet certain criteria to give them the right to offer services in a certain jurisdiction.
The broker will have to abide by all the rules and regulations otherwise their license may be revoked. Now that you know what forex regulation is, the next question is, how do you benefit from working with a regulated forex broker as a trader? When Forex brokers are supervised by a regulatory body, retail traders investors can be sure about the credibility of the brokerage firm.
The biggest risk of working with an unlicensed forex broker is losing your hard-earned money when the broker engages in Ponzi schemes or fraudulent activities. Some of the most common fraudulent activities in the forex industry include excessive commissions, very wide spreads, restrictions on withdrawals and hidden terms and conditions.
Regulatory authorities have created a platform wherein such case cases of fraud in FX trading can be dealt with effectively. Regulatory bodies have been mandated by the law to deal with any broker engaging in illegal practices by following the stipulated legal channels. They can sanction, restrict, or ban the broker from ever conducting business by permanently revoking their license. The only problem here is the fact that the regulators can only deal with cases in their jurisdictions.
Even so, there has been a noticeable reduction of forex trading scams. What will you do as a trader is your broker goes bankrupt or disappears with your hard-earned money? It can painful to lose money in forex trader but if you find yourself in such a scenario, there may be some hope for you, if the broker in question is regulated.
Depending on your case, you can be compensated for your lost funds as most regulated brokers have some form of insurance for their clients. If, for some reason, your CySEC regulated broker canceled your profits, went bankrupt or engaged in actions that led to the loss of your funds, you may be eligible for compensation by ICF. To claim your compensation, you are required to visit their website and fill an online form or send a letter attaching all necessary documents to their offices.
This way, the broker will always be able to attend to your withdrawal requests without any issues.
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Most unregulated forex brokers will often come up with tricks to lure unsuspecting potential clients. Regulatory bodies also prevent brokers from using dangerously high leverage options, extreme wide spreads, and enticing marketing schemes.
You now know the benefits of working with regulated brokers, but how do you determine whether a broker is licensed or not? How do you know when a broker is lying they are licensed and regulated?
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Here are two ways to determine whether a forex broker is licensed;. Regulatory bodies require the forex brokers regulated by them to list their list details regarding their regulation on their websites. This includes their license number and the name of the regulatory authority. This information can be found in the About Us section or at the bottom of each webpage on their website. Most regulatory bodies have a website with a tool to search license numbers of the brokers they are regulating. This allows you to verify if the license number is genuine and valid or fake.
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Forex trading is a very risky business to venture into. But if you partner with a regulated broker who has your best interests at heart, you can turn it into a lucrative venture. Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website.
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Professional way This method involves doing your own research. The professional way of choosing trusted forex brokers is explained in step-by-step format for your convenience: Step 1: Know exactly what you want to achieve through forex trading It makes things much easier if you write down a list of features that you want in the forex broker you would like to work with. You can achieve this by writing down answers for the following questions: What currency pairs would you want to trade in? What type of spreads would you be comfortable with?
How much money can you invest in forex trading? What are the tools and indicators required for you to trade forex? Do you need any specific trading platform? Do you want to hedge? Will you need a trailing stop? What type of broker do you want to work with? How much are ready to pay for funds transfer and withdrawing money from your account? Step 3: Read reviews of selected trusted forex brokers Reading reviews of forex brokers is definitely helpful, but it can be confusing, sometimes even overwhelming.
It is, therefore, important that you stick to the following rules when reading reviews: a If the broker has been operating for more than 10 years, you can be sure that the company knows the business and cares for its clients. Step 5: Additional tips on how to choose trusted forex brokers Your approach to identifying a trusted forex broker should be similar to one you use to choose a bank and entrust your money.
Why You Must Trade With Regulated Forex Brokers The foreign exchange market, also known as forex is the largest and one of the most liquid capital markets in the globe with trillions of dollars exchanges daily. Benefits of Working With A Regulated Broker Now that you know what forex regulation is, the next question is, how do you benefit from working with a regulated forex broker as a trader? Fraud Protection When Forex brokers are supervised by a regulatory body, retail traders investors can be sure about the credibility of the brokerage firm.
Compensation What will you do as a trader is your broker goes bankrupt or disappears with your hard-earned money? Protection from Free Money and other Tricks Most unregulated forex brokers will often come up with tricks to lure unsuspecting potential clients. Financial markets, including forex and more recently even cryptocurrencies, are highly interconnected. In the early s, brokers used to concentrate on offering just one asset class, for example, forex, to their customers.
Today, trading platforms are no longer just for trading forex or CFDs ; instead, multi-asset offerings are now industry standards among all the most significant online brokers. That said, the range of products and markets you can trade still varies considerably across firms. When it comes to the best international offering IG offers traders over 17, tradable instruments , including 93 forex pairs. IG carries multiple global regulatory licenses, which includes licenses from top-tier jurisdictions such as the US, UK, and Switzerland and in addition to forex and CFDs , IG provides traders access to global stock exchanges through its share dealing account offering.
Interactive Brokers takes second place and boasts a wide range of top-tier regulatory licenses. Interactive Brokers is best suited to professional traders and provides traders with access to 7, CFDs , forex pairs , a list global exchange-traded products , US-traded bitcoin futures, and much more. In order for a trader to trade profitably traders should research content and tools to find and analyse investment opportunities. Leading forex brokers will combine third-party content with in-house research and in the trading platform, research tools are directly integrated.
Research tools will include daily or weekly market recaps and analysis, live trading rooms, integrated pattern-recognition tools for news events and charts, screeners, heat maps, and sentiment indicators. When choosing a forex broker for FX research, traders must remember that quality is as important as quantity. Dukascopy Bank holds the first-place position as the JForex Trader app enables traders to run algorithms straight from their smartphones. The JForex Trader app comes with research and pattern recognition features and also includes an impressive selection of charting capabilities, complex order types, and other advanced offerings.
Saxo Bank Saxo Bank is our second choice with its SaxoTrader GO mobile app which is highly responsive and provides traders a unified experience with its web-based platform, syncing trend lines , indicators, and watch lists. Here are the three most important factors to keep in mind when it comes to choosing an online broker for forex trading.
The second step is to compare the trading platforms, tools, and investment research provided by each broker. And finally, read the forex broker reviews to compare pricing and product offerings. It is very important to use a well-known, regulated broker in order to avoid forex scams. If not, they will be acting as an agent or agency broker by routing the trade on to another dealer.
Hybrid-desks are also available, which may operate as a dealing-desk and agency. Matched-principals on the other hand are dealers who immediately hedge their trades to remove any potential conflict of interest. For forex and CFDs trading , the all-in cost to complete, open or close each trade consists of the spread, plus any round-turn commissions. Overnight financing charges may apply which is known as carrying costs, which can be either a net debit or a net credit.
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Trading forex is risky business and not easy to boot. Even the most seasoned of forex traders make time to learn new lessons and concepts. While this article aims to point traders in the correct general direction, only a trader will know their own personal needs. Take them into account, together with the recommendations made. View Share.