You can find several reasons why choosing a regulated forex broker is preferable as compared to a retail broker. Simply put, a regulated forex broker acts as a middleman between the currency buyer and seller. Since there is a huge amount of money at stake, there’s a lot at risk in the world of forex trading. With that said, let’s take a look at the merits of regulated forex brokers for amateur and semi-professional traders. Firstly, managing and regulating your trades with a regulated forex broker is very convenient. In previous years, a lot of forex brokers took much of a laid-back and static approach to forex trading. Thus, there was simply no way for an average forex trader to regulate their trade.
Regulated forex broker required to follow governmental rules and regulations that make it mandatory for forex brokers to offer the best services to their clients. Therefore, all their transactions and activities are honest and transparent. For this, the forex broker has to ensure that all the rules related to margin requirements are adhered to. Hence, there is no way for a trader to get manipulated by the broker. It also means that the broker never happens to be on the wrong side of the law as it would mean permanent termination of their employees.
The regulation also minimizes the risk of scams and fraud among traders. A significant way the traders are fooled is by the manipulation of the price of a currency against some other. In this particular scenario, an unregulated forex broker can easily lure novice, inexperienced and less disciplined traders and investors into their firm’s trading room. So when they get exploited by these unregulated offshore forex brokers, maybe due to their lack of due diligence in the trading platform, they often feel disheartened and withdraw from the market. This inevitably leads to a downslide for the weaker currencies.
All brokers don’t have to be regulated; some are unregulated due to their own choice. But they can follow the minimum regulatory conditions and perform regulated functions. Thus, these brokers must adhere to anti-spam and anti-fraudulent laws but are not held accountable to the regulator for non-compliance. For someone who is just starting out in the forex market, it is vital to differentiate between a regulated and unregulated forex broker. Similarly, if you are considering a non-regulated broker, switching to another forex broker is better to get the most out of your investment.
Forex brokers can also be called online FX brokers. Online forex brokers don’t deal with their clients directly. Instead, they have brokers with whom they work through. Forex transactions are conducted on a trading floor where the buyers and sellers tend to meet to place bids on a particular trade. This trading floor where bid and ask are processed is called the trading platform. Once the trader decides to buy or sell, the forex broker shares the details of the trade. Then the trade is finalized at the EOD, where the buyer and seller receive what they were looking for in exchange for the buy/sale transaction.
Regulated forex brokers need to have licenses from authorized regulatory bodies. These licenses are essential to run the forex business and conduct any type of forex trading. Additionally, regulated forex brokers must also know about current news events that can influence currency prices. These news events include economic reports and changes in government policies. The regulated forex brokers must be able to analyze such news events to make effective decisions for traders.
Although a forex broker offers a wide range of services to its clients, one must never forget to consider certain factors. In simple words, any forex trader should never compromise these factors when selecting a forex broker. Firstly, the broker should have an efficient security system in place to protect the traders’ interests. This is done to keep the clients’ personal and financial information confidential and safe so that no one can misuse it.
Most importantly, the forex broker you choose must have a good knowledge of various currencies traded in the forex market. Therefore, they must be competent in predicting the movements of different currency pairs on a real-time basis. Accordingly, they must act so the trader can gain the maximum benefit from the price change in currency.