The first thing traders have to consider when starting forex trading is choosing a decent broker. There are many elements of a broker needed to be look at but the most important one is whether that broker is under regulatory. These regulated forex brokers will keep the risk level at minimum and surely protect your capital. Some examples of brokers you can chose are: brokerage company, individual brokers, or partner of individuals.
Reasons for doing trade with regulated forex brokers
Nowadays you can just simply stay at your house to do trading with an Internet connected computer. Because forex trading is available everywhere in the world and trading process is not complicated like before. There are too many available forex brokers so to ensure the safety level (not losing your money for brokers’ mistakes) you should narrow them by regulatory features.
Definition of regulation term
According to Mr. Fanara Filippo from BRKV, You can simply understand regulation as: global financial individuals set a fixed rules which require them to not to obey the rules but to follow in trading with customers. For forex broker, it is said that the best is they hide a third party to cover the laws part in trading. These rules will be provided by financial regulator in the town and contain what broker should do to run the company. Also, some moral codes which broker should follow are included in these rules.
In terms of financial side, these regulated forex brokers have to report their activities with the local regulator at a specific of time. Experts will examine operational accounts and give result whether company obey the rules. Besides, these brokers have to set a fixed amount of liquidity and capital reserve to increase their trustworthy features which include maintaining trading process in any cases.
A well regulated broker is who meets all requirement of these rules. If they disobey any rules, they can be considered as committing a crime then punishment will be offered by local regulator. They even can be closed compulsory by local regulator if they do not perform the given rules. To expand business size or have more customers, brokers should follow the rules instead of violating them.
Features of regulation term
So what you should look at to know whether a broker is regulated? Definitely not the fancy website or attractive system. You must go to “About Us” part and find any information such as a registration number of that broker have at a specific regulator. For example, every country has an exact bodies in forex regulation system similar to the United State’s one.
Is it good to have many regulations?
When selecting a forex broker out of many, you can see that some brokers acquire only 1 or 2 regulations while other can have up to 5 or 6. So which is better? Besides security, regulations also mean limitation. So when a broker has too many regulation, its features are limited and not as competitive as others. One or two regulations are good enough.
In short, regulated forex brokers will help you earn more money, protect your capital, and make you feel safe when doing trades. You should consider to do trading with them to guarantee your money and prevent any heart-attack from loss orders. Looking at brokers’ website and find information about their commitment to given rules, you may know which brokers are under regulatory then have the best choice.