Trading with unregulated brokers

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Why Should you not go For an Unregulated Broker?

Why Should you not go For an Unregulated Broker?

The forex market is swamped with brokers, some of whom are regulated and some who are not. When it comes to choosing a suitable broker to suit your needs, it can be difficult to know which to select – should you go for one of the many regulated brokers or risk going with an unregulated one? Regulated brokers are those who are registered with the financial regulatory body of their country (for example the FCA in the UK) and who must comply with the rules set down by that body.

Regulated brokers must be able to submit evidence of regular audits, must always submit their accounts on time and must adhere to stringent criteria in order to remain on the regulatory body’s lists. Unregulated brokers, on the other hand, do not have to comply with any rules but can behave in any manner they see fit. Here we look at the drawbacks of choosing an unregulated broker so that you can make an informed decision.

Why are Some Forex Brokers Unregulated?

Any online search will reveal numerous reliable forex brokers who boast their regulatory pedigree on their homepage. Being regulated adds to their credibility and helps potential investors to see that they are a trustworthy operation. Despite this, many brokerages operate without regulation in offshore jurisdictions. One of the major reasons that these brokers choose to forego regulation is that this is one way in which they can cut their operational costs.

Obtaining and maintaining a license costs a lot of money, sometimes in the millions, and this can form a barrier to those who are just setting up as a new brokerage service. Another reason is that many of these brokerages are based in offshore tax havens, which enables them to limit their tax burden. Unregulated firms are also able to offer different product ranges or service customers which they would otherwise be unable to serve. Of course there are some unregulated brokers who do not have legitimate business reasons for failing to obtain a regulation license. These take advantage of investors, engaging in fraud or bad business practices which can cause financial hardship to their clients. Traders who choose to invest with an unregulated trader and who encounter problems will have very little recourse and may suffer from significant financial losses.

What are the Risks of Choosing an Unregulated Forex Broker?

Any investor who takes the chance of trading with an unregulated broker is taking a major risk with their money. Traders are protected from mistreatment and fraud when they choose a properly regulated broker and this is vital in any circumstance where things go wrong.

Investors who choose a regulated broker can benefit from financial compensation in the event that their brokerage firm goes out of business and can have peace of mind in knowing that their broker must comply by all the rules and regulations of their regulatory body and therefore they will be safe from mistreatment. Although being regulated can be no guarantee that your forex broker will treat you well, it does help to reassure investors that their finances and personal information is in safe hands.

How to Avoid Unregulated Forex Brokers

Unfortunately, many investors end up getting scammed by unregulated forex brokers as they either are unaware of the importance of choosing a regulated broker or they did not pay enough attention when making their selection. To ensure that you are choosing a reputable and regulated broker, always take the time to thoroughly check the firm’s website to discover their regulatory body and check that their membership is genuine before committing any funds to an account.

Why are there some people who trade with unregulated brokers?

From what I have researched, there is a lot to be said about both, however, excuse my biased ass, but I am an advocate for unregulated brokers as I feel there are more advantages for the clients trading via an unregulated broker compared to regulated brokers.

Becoming regulated, for the broker as a company is a very expensive thing to do, therefore they look at recuperating those funds back in, VIA their clients. SO, what they tend to do, is bump up the client costs through widening the spread, offering lower leverage, and bumping up the trade commission charge per trade that ge.

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Regulated vs Unregulated Brokers – Which One You Should Choose

Forex, also known as FX or foreign exchange is one of the biggest and most liquid decentralized markets in the world with a normal day by day exchanging volume exceeding $5 trillion. In the past few years, forex trading gained a notable popularity due to the opportunities it offers and its ease of access.

If you decided to become a forex trader, you have a long way to go until you reach your first victory; but knowledge, information and logic thinking will get you there. The online broker you choose is the first and most important step towards this journey, that’s why is crucial to pick the right one. Here are a few things you need to look for in an online broker.

Regulated vs unregulated brokers

Why is it so important for an online broker to be financially regulated by one or more regulatory bodies? Because we are talking about the safety of your capital, the money you invest and the promise of the broker to use your funds solely for the right purpose. When a broker is unregulated, this means that there is no regulatory organization or group of persons monitoring them, in other words, they can take your money and disappear. This is the reason why you see lists of online brokers described as scams or frauds. The first thing you need to do while checking out online brokers is to verify whether they are regulated or not. For example, TradeFW.com is a trustworthy online broker, regulated by CySec and MiFID compliant, an excellent choice for both novice and experienced traders. Their transparency and the amount of legal documentation they put at your disposal is a sign of professionalism and a feature that any legit online broker should have.

While there is no international organization to protect all forex traders, there are certain countries that monitor and oversee forex trading activity and the legitimacy of online forex brokers. Do some research about the regulatory agencies in your country or the ones in which the broker has the headquarters. Take your time and check in all possible ways if the online forex broker you’re about to trade with is genuinely financially regulated. The safety of your capital is the first step towards success and profit.

Only settle for the best

While being financially regulated is crucial, equally important for your trading success is the environment, instruments and help the online forex broker provides. Trading forex is no piece of cake because before the actual trading process takes place, you need to read and get to know the basics, otherwise, you will not know what to choose or how to separate the good forex brokerage firms from the bad ones. Here are a few essential things you can check:

Make sure they have a trading platform which is easy to navigate and has all the required tools, advanced charts, and optimal speed. See if they provide various account types and if any of them has the features you need (like the suitable minimum deposit demands, the right spread, and leverage) and if their list of products is what you’re looking for. In addition, check how available they are, if the accounts come with a personal account manager, if the time schedule of the customer support service is what you need and if they have any headquarters. Don’t hesitate to call or e-mail them your questions, a professional broker will always have a team of experts ready to answer.

All in all, the best online brokers know they should provide anything but the best to their traders because when traders make the profit, they make the profit. That’s why you need to settle only for the best.

Conclusion

In the end, the rate of success stands only in your hands and the decisions you make belong only to you. There will always be good and bad in this world and the forex trading market is no exception. Knowledge is power and once you will be able to identify your needs and choose the right online forex broker for you, success and profit will eventually come.

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