In this first article of the selecting your broker series we are going to look at one of the most obvious signs of a reputable broker, and that is them being regulated in your home country.
So why use a regulated broker? what are the benefits of doing this?
Well when a broker is regulated they must adhere to various rules regarding good practice and risk reduction, so for example a regulated broker would be required to hold a minimum amount of capital to facilitate customer withdrawals etc…. these rules are designed to prevent the broker being able to simply shut up shop and take customers deposits with them overnight. The process of becoming regulated is a long and expensive one, so the theory is that completing regulatory registration would be prohibitive if the broker didn’t plan to stick around for the long term.
Regulated brokers also usually keep clients funds in segregated accounts so if the company did come into financial difficulty there is less chance of your funds being sucked away with this. (although there are notable exceptions such as Refco in recent years.)
In summary, if you want to have the best chance of keeping your investments safe in Forex, the minimum safeguard that you can demand is that your broker is regulated in your home country.
If you have had any bad experiences with brokers or indeed good experiences let us know in the Forum so that our community can benefit from each others experiences.
