Forex trade is considered to be one of the most profitable businesses by traders and investors across the globe. Forex trading in layman terms is buying and selling of currencies Since there is no physical presence of any market, traders need reliable brokers that act as facilitators between them and their bank. However, the biggest challenge lies in finding a trustworthy broker to conduct the business reliably.
The right broker can help you in taking the right decisions. While choosing the broker, one should take into consideration the aspects of commission rates, leverage points, spreads and past performances.
The broker that you choose to act as your intermediary can be a Regulated Broker or an Unregulated Broker. Let us know about both the types in detail.
As the name suggests, this category of forex brokers would always be registered with the respective financial regulatory body of the country in which they are located and would always comply with the guidelines and standards as set by them. Regulated brokers have the need to adhere to all strict policies and practices as set by the regulatory board in order to retain their licence. In addition, they would also have to submit their audit reports and book of accounts to the board as and when required.
Regulated brokers bring to the table the transparency of business. As per regulatory terms, no client can be manipulated. The law is always on the client’s side if such a situation arises. And the audit reports would also speak of the brokers business practices.
Regulated brokers give their traders the security of their funds since at no point in time can the brokers mix the firm’s capital with the traders’ funds.
Traders are protected from various malpractices like price manipulation, misusing the trading platform or holding on to clients money if they are working with a regulated broker.
If all brokers were ethical and followed rules, there wouldn’t be any unregulated brokers, but this is not the case. Unregulated brokers are very much prevalent in the trading market, and most of the time, they offer attractive propositions to their clients in terms of commission rates and other features. These sets of brokers would give traders no security of their money, and the traders too would not be able to ascertain how their money is being utilized. Since a statutory board does not guide unregulated Brokers, their actions are in most cases non-transparent. If any legal case were to arise, the client’s rights are never secured in such situations.
How to know if your broker is a Regulated Broker?
A trader can know about the broker through their websites. It is mandatory to mention the name of the statutory authority under which the broker is licensed and also the details of the license. The same information is also available on the register of the regulatory body.
The advantage of using a regulated broker as an intermediary is long term. However, there are traders who look for short term gains and employ the services of the unregulated brokers which in many cases boomerangs and traders stand to lose money.
Online forex trading can be fun, profitable or extremely risk-prone if trading with unregulated brokers.
So if you plan to enter into the forex trading arena or aspire to, you need to choose your broker wisely. Delve into the merits of taking the services of regulated brokers and weigh your options and requirements.