Brokers are companies or individuals that connect traders with the international foreign exchange market. They facilitate the trade of currencies and help you with each buying or selling transaction you embark on. In forex trading, brokers can either be regulated or unregulated. Experts strongly recommend that you only work with regulated forex brokers if you want to maximize the protection and security of your funds, despite the risky nature of the business.
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Regulated forex brokers are those that are governed by official regulatory bodies that are recognized all over the world. They abide by strict guidelines when it comes to trading procedures and will face sanctions if they do not comply with the regulations in the industry. Because the actions of regulated brokers are monitored, traders that work with them will be able to enjoy a higher level of protection in this rather perilous environment.
An unregulated broker, on the other hand, is not governed by any organization and can basically do anything that they want. This places their traders at a very risky position. There are some unregulated brokers that don’t want to get licensed simply because they want to avoid paying higher fees. They might also just want to be free of supervision because they want to make their own decisions.
Not all unregulated brokers are necessarily unscrupulous entities but at the end of the day, you can never really tell. If a broker is unregulated, they can disappear and take all your funds with them, and you won’t even have a chance of going after them or recovering your money.
In the forex market, there are millions of dollars exchanging hands every single day, which presents vast opportunities for an unregulated broker to take advantage of an unsuspecting trader and make off with some cash. In order to prevent this from happening, there are regulatory bodies that oversee the brokers’ activities, thus ensuring your protection as a trader and guaranteeing the safety of your funds.
All countries that allow forex trading have their own regulatory authorities to supervise the trading activities in their own country. But there are also some regulators that stand out because of their strict auditing procedures and very high standards. Brokers that are regulated by these bodies are considered to be much more trustworthy and are therefore more attractive to traders from all over the world.
That said, here are some of the top regulatory bodies that you should keep in mind when finding a broker to work with.
We have already talked about the function of regulatory bodies and even listed some of the best of these regulatory bodies from different countries. But what does this all really mean for a trader? Is it really that important to look for a regulated forex broker if you want to start buying and selling foreign currencies? The answer is yes. If you need to be convinced, here are some of the most significant benefits that you can enjoy if you choose a regulated broker for your forex trading activities.
With a regulated broker, you have the assurance that your funds are in safe hands. Of course, there is always the chance that you will lose money due to an unsuccessful trade but other than that, you can be sure that the broker will keep your funds protected and that they will not suddenly disappear, as what many fly by night brokers are bound to do.
There are clear regulations that prevent a broker from combining their company’s funds with those of their traders. So no matter how much money you invest, you never have to fear losing it through the broker’s unlawful actions.
You will always know exactly what is going on with your trades and your funds if you sign up with a regulated forex broker. From the start, they will be very clear about what fees you need to pay, and they will also provide you with a clear computation of all the fees, charges and commissions that you need to pay.
The main reason for this is because transparency in trading operations is one of the requirements of international forex trading regulatory bodies. Furthermore, all regulated forex brokers are obligated to submit regular financial reports as part of the condition of their membership under these regulatory bodies.
Not all regulated forex brokers offer the same quality of customer service as some definitely perform much better than others. However, all regulated brokers do have a reliable customer support system that you can get in touch within case you have questions or need any kind of assistance in relation to forex trading.
Regulatory bodies have very strict sanctions against fraudulent activities by brokers, including a permanent disqualification from the forex industry. Naturally, regulated brokers don’t want this to happen so you can be sure that you will be strongly protected against fraud.
It is very clear by now that checking for regulation is one of the most important things you need to do when you are looking for a forex broker to work with. But of course, that is not the only criteria that you should consider in your search. In order to enjoy the best possible forex trading experience, there are a lot of other factors that you have to examine before you can make your final choice. Here are some of the most crucial criteria.
Each broker has a few trading platforms that they offer to their traders. The choice of platform will depend on your trading strategy and skill. For beginners, it is very important to find a platform that is simple and easy to navigate. A more experienced trader would want to use a platform with a lot of advanced features and tools. If you are constantly on the go, you might prefer a mobile trading platform but if you are on your desk most of the day, a web-based platform that you can access on your computer might be more suitable.
Different types of accounts typically have different types of features. Some account types have no minimum deposit requirement while others require you to deposit quite a substantial amount before you can start trading. Also, many elements like the spread and the leverage will vary depending on the type of account that you open so you have to compare each type carefully first before making a commitment.
If there is a specific currency pair that you are interested in trading, you have to make sure that your selected forex broker offers this particular pair. Not only that, but you also have to check whether the spread that they are offering for that pair is competitive enough for you. If you are thinking of trading in a few different currency pairs, check out the list of products that the broker is offering to see just how profitable it would be to work with this broker.
There are hundreds of regulated forex brokers that you can choose to open an account with but based on our research, these are the top 5 today. You will still have to take your personal needs and preferences into consideration but we believe that you can’t go wrong if you choose any of these top brokers in our list.
Regulated by the ASIC, JFSA, MAS, FINMA, FCA and CFTC, it is no surprise that IG is hailed by traders around the world as one of the best because of its highly advanced research tools, very competitive pricing and abundant education, and a vast range of products available for trading. IG had been in the industry since 1974, making it one of the most reliable and most trusted brokers today. This broker particularly stands out for their mobile trading platform and their own proprietary platform. They have a minimum deposit requirement of USD 250 or GBP 300.
Since it is operated by a bank, this broker is by far one of the most secure companies that you can trust with your funds. They also have competitive pricing in commissions and spreads across the 182 currency pairs that they have available. Their trading platforms are also very impressive and packed with tons of useful features. Saxo Bank has received multiple awards for the comprehensiveness and high quality of their research tools, which have proven very useful for their traders. Probably the only downside is the minimum deposit of $10,000 which is definitely high, unless you are in the UK in which case you only need to deposit at least GBP 500.
This is one of the brokers that do not require a minimum deposit so you can start trading with any amount that you want to invest. CMC Markets has been helping traders since 1989 and is regulated under four top tier regulatory bodies, namely, ASIC, IIROC, MAS and FCA. They are popular for offering very low costs, which is certainly favorable for any trader. When it comes to the very popular MetaTrader4 platform, CMC Markets offers close to 12000 tradable symbols, including 158 different currency pairs. They also have a powerful Next Generation trading platform that has bested many others in the industry, as well as a stellar mobile app that has also received numerous accolades from the forex industry.
Again, this is another broker that has no minimum deposit requirement. They are also a strongly established company, having been in the business since 1977. Most of the traders that have a membership with Interactive Brokers are veterans in the industry or fairly new traders that are heavily invested in the business. This is because IB offers a myriad of advanced tools for trading, both in their desktop and mobile platforms. This is definitely a huge advantage for serious investors but unfortunately for casual traders, IB does not have a simplified version of their platform. They also do not offer the popular MT4 or MT5 trading platforms. Interactive Brokers is regulated by the IIROC, SFC, JFSA, FCA, MAS and the CFTC.
If copy trading is your preference, eToro is the broker that you should choose. The pioneers of copy trading, which is also known as social trading, eToro was established in 2007 and has quickly risen in popularity because of their innovative system of forex trading and the ease of navigation of their platforms that makes them highly commendable for new traders. Compared to similar brokers, eToro’s fees are slightly higher and they also have a minimum deposit requirement of $50 to $200, depending on the type of account you are opening. eToro is licensed under the ASIC and the FCA.
Forex trading is very exciting and comes with a considerable amount of risk. If you want to succeed as a forex trader, you need to acquire a lot of knowledge about the industry and practice, practice, practice until you become confident in your trading skills. Most of all, you should work only with regulated forex brokers so that you can minimize unnecessary risks and make the most of your trading experience.
Regulated brokers are safe in that they abide by standard rules and regulations in the forex industry as enforced by the regulatory body that controls them. However, trading with them does not guarantee that you will make a profit in all of your trades.
Forex regulatory organizations are responsible for the licensing and registration of forex providers. There are several national trading organizations around the world that check to ensure that all forex brokers adhere to certain standards. I.e. The Financial Conduct Authority (FCA) is the regulatory authority in the United Kingdom.
No. There are many brokers that accept international traders. Check with the broker before opening an account to see if they accept US citizens.
The most important advantages are fund safety, transparency of operations, reliable customer support and protection from fraudulent activities.
All countries that allow forex trading have an entity that regulates forex brokers operating in their country. It is advisable to sign up with a broker that is licensed under your country’s regulatory body for your protection.
No, you are free to work with an unregulated forex broker but you should understand the risks that are associated with this option.