Online Forex trading can be profitable, fun and yes, extremely risky when choosing to trade with an unregulated broker. We’ve all heard the unfortunate stories about scammy online brokers suddenly shutting shop and vanishing into thin air along with their traders hard earned money. Enter regulated; trading with European regulated brokers will allow you to trade with full transparency knowing your money is in safe hands, from first deposit to final withdrawal.
If you’ve landed here, you’re probably a Forex trader, or at the least striving to become one. And rightly so. Over the past decade, online Forex trading has become the fastest growing earning method among millions of everyday investors. But having to choose between hundreds of Forex brokers makes it difficult for traders to choose the best brokerage and leaves them at the mercy of the broker when it comes to honesty and transparency. Here, reckless trading through unregulated brokers can be as risky as sticking your head in an alligator’s mouth and eventually just as painful.
We all come to trade for one reason- to profit. Therefore, when it comes to the protection of your funds, it’s important to find a trustful online broker with ability and the willingness to help you with your financial endeavors.
What to Look Out For
The financial markets are a complicated place in which to invest your money. To protect those with little knowledge or expertise, regulation plays a vital role. In other words, when a broker is regulated, they receive a license to operate in the jurisdiction and must adhere to the respective rules and industry standards such as submitting to regular audits and evaluations, ensuring transparency and more importantly, protecting investor funds and interests. Furthermore, if a Forex broker is regulated, the name of the Forex regulator should be clearly listed on the home page.
On the other end, you will find the unregulated brokers. Like a fox in a chicken coop full of malicious intentions, most of them seek to take as much of your money as possible by offering empty promises and without giving anything back in return. We’ll just say one thing- beware and trade at your own risk.
The Cyprus Securities and Exchange Commission
The Forex industry is decentralized and there is no central agency that controls the market. However, there are several government and independent agencies that supervise the working of these markets. These agencies act as watchdogs and issue licenses to brokers to operate within the market.
When it comes to jurisdictions, CySEC (The Cyprus Securities and Exchange Commission), introduced back in 2001, is one of the most popular regulatory agencies in the world. Ever since Cyprus became a part of the EU, the CySEC also became a subsidiary of the European MiFID regulatory organization, thereby enabling all CySEC members to carry out business across the European continent. As a result, CySEC regulated Forex brokers are completely accountable under the MiFID directive, and are liable to legal action, including hefty fines and suspension of licenses, for non-compliance of the stipulated laws and guidelines.
The Importance of Trading with A Regulated Forex Broker
A regulated broker not only follows Forex regulation, but also offers safety, reliability, and security. Many unregulated Forex brokers will use unethical business practices to increase their profits, for example give out high bonuses to new customers. However, these bonuses will not have any meaning if you cannot cash out your profits. Hence, the biggest advantage of trading with a regulated broker is that you will be able to quickly and efficiently withdraw your balance, including all profits, from your trading account. How is this assured? By preserving high liquidity. Brokers who follow Forex regulations must keep sufficient funds to execute and fulfill contracts. In addition, they are prohibited from using client’s funds to back any company debts.
Although often misleading, it’s important to realize that not all Forex brokers are indeed regulated. It’s therefore important that you check the legal background of the broker before investing and verify that the broker you approach meets the terms and conditions in accordance with regulation standards.
To conclude, choosing a regulated Forex broker will always be the best and safest way to trade the financial market, both in terms of legality as well as in terms of security.