Ponzi schemes, fraud, outrageous commissions…unfortunately, trading brokers don’t always play it by the book.
If you plan on investing large sums of money with a broker, no matter which assets you want to trade in, it absolutely makes sense to do so with a firm that is reliable, trustworthy and professional.
But how can you tell if a broker satisfies those criteria without first joining them? That’s where doing your homework to find the safest forex brokers really comes into its own.
So what should you be looking out for in a reputable broker, and what are the warning signs to look out for?
Licensed and regulated
Forex trading can be reminiscent of the Wild West if you don’t invest your money with a licensed and regulated broker – if you go with an offshore, unlicensed operation, there really is no recourse if they suddenly disappear off into the sunset with your money.
That’s not to say that all brokers that are licensed by a ‘soft’ authority like the Marshall Islands are fraudulent, but not all regulated brokers are first-class either. It’s about playing the percentages and knowing that firms licensed by recognized authorities are held to higher standards.
Ideally, you’re looking for a forex broker that is regulated by the Financial Conduct Authority in the UK or the Commodity Futures Trading Commission in the US, with other options including ASIC in Australia or CySEC in Europe to also be considered.
Each of those authorities has a register into which you can type the name of a broker to see if they are licensed or not.In America, other professional bodies, including FINRA and the Securities Exchange Commission (SEC), can also be called upon as a second line of defense.
It doesn’t matter which investment vehicles you favor, deploying a licensed and regulated broker is essential across the board.
Unforeseen circumstances can happen in the trading sector, and you need to know that your money is safe in the worst-case scenario.
You should always look for a broker that stores their clients’ capital with a secure banking institution.Ideally,those funds should be held in an account that is separate to the broker’s own banking – that way, if they go bust, you should still be able to get your investment returned.
It’s also important to know what steps the broker will follow if they are the victims of hacking or fraud that leads to your capital or even your personal data being taken. Some will be only too happy to reimburse those affected…others will hide behind legalese and terms and conditions to get out of repaying you.
In this day and age, it’s definitelyworth finding out where your broker stands on the matter.
Hell hath no fury like a trader scorned.
If somebody has had a bad experience with a broker, they will be only too eagerto let the world know about it on the various review platforms that exist.
It’s important to take one-off, isolated bad reviews with a pinch of salt – sometimes, that will have come about due to a misunderstanding or a one-off case of negative customer service.
However,reading a bunch of reviews – and drawing a picture of what the broker is really like – is one form of defense you can take and often helps to separate the reliable and trustworthy brokerages from the rest.
Beware the golden carrot
It’s human nature to be seduced by the lure of bonuses, offers and the promise of ‘enhanced’ trading conditions.
But quite often the welcome packages offered by brokers don’t stand up to scrutiny, and what at first glance appears to be an eye-catching deal can actually turn out to be an albatross around your neck.
It’s recommended that you read the terms and conditions of all of the welcome bonuses that you intend to claim when joining a new forex broker. And that means to really read them…not just have a quick skim through. The devil is usually in the details!
You could be trapped by excessive wagering requirements, be given just a matter of days to satisfy the bonus criteria or find a number of obstacles put in place for you to overcome…all of which are designed to stop you taking full advantage of the bonus.
Identifying which welcome bonuses are simply not as enticing as they claim to be is crucial before joining a new forex broker – as is following the other guidance outlined above.