Forex trading is inherently risky, what with only a percentage of forex traders finishing in the money. To complicate matters, many unwitting traders register at unregulated and unlicensed brokerages. Arguably the most important contract a forex trader can ever make is the one with a forex broker. Any time hard-earned money is changing hands, the veracity of both parties to that transaction must be verified.
There are simply too many problems that can arise with respect to trading at disreputable brokers, notably theft, non-payment, hacking of personal data, or sketchy forex rates designed to benefit the broker over the client, among others. Many negative possibilities abound, and none of them bodes well for the unsuspecting trader.
The Integrity of the Forex Broker is Paramount
If you trade currency pairs like USD JPY, USD GBP, USD CHF, or even USD ZAR, for example the expectation is that if your trade finishes in the money you will be able to withdraw your profits without any problems. This is where the reliability, transparency, integrity and authenticity of the trading platform comes into play.
The objectives are clear: pick the right broker, avoid scams and pocket your profits when applicable. The type of broker you pick depends on your own trading preferences. For example, will you be day trading minor, major or exotic currency pairs? What types of trading activity are you interested in? It may be preferable to select ECN FX brokers. These brokerages are ideal for scalping purposes.
Another important consideration when picking a forex brokerage is the amount of funds that you wish to deposit or withdraw. The greater the latitude you are offered, the better. Brokers vary in terms of what types of services they offer their clients. Some brokers are limited to currency pairs trading, while others offer cryptocurrency, stocks, indices, and commodities.
Even within the forex trading realm, there are many different types of trades you can make. These include forex CFDs (Contracts for Difference), or straight up forex trading options. When you engage in forex trading with a reliable platform you are assured of several things, notably:
- Transparency of Operations
- Full Licensing and Regulation
- Generous Leverage on FX Trading Activity
- Guaranteed Payouts of Profits on FX Trades
- Comprehensive FX Trading Resources and Information
- A Wide Variety of FX Trading Options (Currency Pairs)
Honest FX Brokers Don’t Sugarcoat Your Chances of Finishing in the Money
According to analysis, an estimated 76.4% of retail investors lose money with Forex CFD trading. It is inherently risky to trade FX online, and all reputable forex brokers make this known upfront to traders. Another important consideration is the reliability of reviews of the forex brokerage online.
Since many forex brokers do their own PR, using paid reviewers on affiliate marketing sites, it’s often difficult to source reliable reviews. That being said, it’s always a good idea to read off-site reviews on independent review sites. The complaints are more important than the glowing recommendations. Plus, the responses from the forex broker are sacrosanct.
Highly-responsive FX brokers are always better to deal with since they are invested in trader-centric practices. Most every reputable FX brokerages will have a demo-trading platform available to traders. The option to use a demo account facilitates an atmosphere of greater trust between the trader and the broker. Since new forex traders have to undergo a process of learning with respect to the trading platform, this is a courtesy that is appreciated by traders.
Wrapping it Up
On the topic of licensing and regulation, there are various authorities around the world to consider. Certain regulatory institutions are more credible than others. It is always best to pick a broker which boasts multiple licenses from different countries, jurisdictions, and locales.
The likes of the FCA (Financial Conduct Authority), CySEC (Cyprus Securities and Exchange Commission), ASIC (Australian Securities and Investments Commission), the Monetary Authority of Singapore (MAS), and the Financial Sector Conduct Authority (FSCA), rank among the most reputable authorities.
Chances are that a fully regulated broker will not want to jeopardize its reputation by acting against the rules and regulations of its licensing authorities. These are among the most important factors to consider when choosing a forex trading platform.