Both Forex beginners and professionals agree: there are a lot of brokers available on the market, and finding the right one is sometimes not so easy.
According to the law, a natural person cannot access the currency market in a direct way, hence the market is supersaturated with intermediaries and every one of them is positioning himself as a reliable broker. However, in our everyday life, from time to time, we face dishonest practices –it concerns the companies which are financially interested in closing clients currency transactions with a loss. Quite often they have not received an appropriate financial regulator licence. There are even cases when companies are cheating and indicate a non-existent license on the website.
How to make sure that the selected Forex broker is a professional and reliable partner? How to choose the right broker?
Before starting to work with a broker, it is necessary to carefully examine all the information available to him, paying attention to seemingly minor details. The information about any broker can be checked at the official supervisory authorities, which will make sure that the broker really has all the necessary permits.
How to recognize a dishonest broker?
Some people have come across a situation where an unknown caller who does not know anything about you suddenly in a telephone conversation starts to promise you a dizzying profit, for example, by investing in gold, platinum, cryptocurrency (Bitcoin) or other instrument.
It's very difficult to get rid of such callers. The argument that you are busy does not work – they would offer a call at another day and time. Often, they are good psychologists, promising a guaranteed profit without any efforts by investing in “only 100 or 150 euro”, and they look very surprising if the client is not ready to immediately get involved in this adventure. The only way to get rid of these “professionals” is to convince them that you do not have the money – then they will not be interested in you anymore.
In their promises to help you quickly to get rich, such a broker never warns clients of risks, but only tells them about the positive features and potential benefits of a currency or CFD trade.
The country where the brokerage company is established may also be a substance for reflection. Cyprus, Malta and the United Kingdom are the most beneficial choice for the Forex broker and, at the same time,the safest choice for the EU trader. Unfortunately, in Europe, no unified regulator of financial services has been established,therefore, national legislation is in force in this area, which in turn is based on the Markets in Financial Instruments Directive or MiFID. Therefore, the situation in different countries may vary.
Most rigorously, this area is regulated in the United States.Forex brokers are extremely carefully monitored in Israel, but since 2013, in New Zealand, where legislation has become so rigid that many brokerage companies have moved their activities to EU countries.
However, many brokerage companies are still registered in the jurisdictions such as Belize, Seychelles, Vanuatu, Saint Vincent, the Grenadines, etc. Legislation in such countries is less strict, therefore, it is easier to carry out suspicious financial activities in these areas. It is risky to co-operate with such companies: it is very likely that they will be interested to create a delusion that investors have lost their funds, as a result of which the company would get the maximum profit.
Of course, recovering lost money in this case is almost impossible. Get the information on these companies concerning the registration and licenses that give them the right to take specific actions. Fraudsters will give false answers in this case.It is possible that such a company does not have an office or it is in a distant country.
Check if the company has a physical office or representation and if the address indicated on the website matches the legal or actual address, or it is invented. If the company has neither an office nor employees, you should think twice again before you give them your money.
How to choose a reliable Forex broker?
What features to look for before starting to co-operate with any of the Forex brokers?
Large financial institutions, such as banks, are more strictly monitored by the state than smaller market players. Therefore, banks take great care of their reputation, hence the terms of service are clearer and help to reduce the potential misunderstanding between investors and the bank.
Each serious player in the brokerage market must have an elaborated model contract specifying the rights and obligations of both parties, the terms of cooperation and dispute settlement rules. Such a contract not only proves the integrity of clients, but also helps to avoid unnecessary problems in the future.
One should not blindly believe in seemingly beneficial offers, which promise quick access to wealth. Similarly, promise of immediate opening of an account,huge free bonuses and transactions without commission should be treated with caution. Such offers are often just an ad trick, which helps to attract inexperienced investors. It is necessary to carefully evaluate the trading conditions – what is the size of the yield spread of the profit, the minimum amount of collateral, and commissions. It is also important to understand whether the broker offers some kind of protection in the event of a negative account balance. Verify that there are no hidden fees in the service fees.
Today, Forex Terminals have a wide choice. They can vary in terms of speed, functionality, ease of use, security level, automation capabilities and compatibility with your operating system. It is best to try several platforms and then make the final decision and choose the one that suits you best.
There is no need to hesitate to call the broker who is interested in you and ask unclear, awkward questions. This way, you will be able to assess his professionalism and the ability to quickly and successfully respond to all possible difficulties.
Finally, we remind you of the need to select a broker who has received an appropriate financial regulator licence which gives him the right to operate in a particular area. Consequently, such a broker will be required to comply carefully with all statutory provisions.