Avoiding Forex Broker Problems

Checking Out a Forex Broker Online

 reputation matters You can get a general idea about whether or not a broker has had problems with its clients in the past by reading reviews and comments made by other traders who have used the forex broker. For example, some traders may have posted their experiences with the broker on online discussion forums dedicated to forex. For example, one discredited forex broker charged clients with a breach of their rules found in their terms and conditions. Specifically, the terms forbade "pip hunting" - a trading process that involves opening and closing a trading position within a very short period of time. They used this questionable clause to essentially invalidate all of the customer's winning trades. Of course, the account holder was only notified of this apparent breach after having made a large sum of money in the trading account, only to have it taken away by the forex broker because they were seemingly engaged in "pip hunting" activity. Had the account holder only checked a few online discussion forums dedicated to forex scams, they would probably have discovered that this disreputable broker could not be trusted. In general, seek to avoid brokers that have had significant pricing and account management issues or if it routinely engages in questionable broker practices like: Requoting Excessive slippage Front running (read more) Stop hunting Forbidden strategy clauses Performing this research before opening an account with a broker will allow you to better assess the overall reputation of the forex broker in advance. Online research also represents a valid way to determine if the forex broker engages in any of the above questionable practices that may significantly affect the pricing and deal execution service you receive from the broker.

Regulation Perhaps the most important consideration when opening a new account with any broker is whether or not they are regulated and by which agency. The main objective of financial regulatory agencies consists in keeping the dealings of financial institutions with the general public as honest and aboveboard as possible, as well as to protect the interests of individual retail forex traders. The regulatory authorities also periodically review the books of forex brokers in order to make sure that the broker is maintaining the minimum capital requirements. In the event of financial problems and legitimate verified customer complaints, regulating agencies will often intervene with appropriate legal deterrents to close down fraudulent operations and assist in recovering customer funds. The

National Futures Association or NFA regulates and keeps tabs on many commodities and forex brokers doing business with U.S. clients. Furthermore, the Commodities Futures Trading Commission or CFTC also regulates U.S. brokerages and has been granted the authority to take legal action against any firm registered as a broker/dealer that may be suspected of violating any of the anti-fraud sections of the Commodities Exchange Act. If the broker is regulated by both the NFA and the CFTC, you stand a very good chance of starting your trading account with a reputable forex brokerage company. Regardless of a forex broker not needing to register with the NFA unless dealing in the futures markets, many reputable forex brokers go the extra step and register anyway since it increases the scope of their potential business and gives them an additional degree of legitimacy.

Furthermore, forex brokers which are not based in the United States often also register with the CFTC, primarily because it is required if they intend to advise U.S. citizens or residents about contracts regulated by the CFTC. Other major regulatory agencies include the U.K's Financial Services Authority or FSA, the Australian Securities & Investments Commission or ASIC and the Swiss Federal Department of Finance or Swiss PolyReg. In addition, local European agencies operating in their respective countries under the European Union's MiFID or Markets in Financial Instruments Directive are also generally sound. Basically, having your forex broker's activities overseen by at least one major regulatory agency certainly cannot hurt. Although the forex market is unregulated, many forex brokers that deal in other products such as futures will often register with a regulating agency to maintain a clean reputation and to attract more clients. Therefore, to avoid any of the numerous potential forex frauds and scams, only opening a trading account with an appropriately regulated and well capitalized online retail forex broker makes a lot of sense. Finding the Best Forex Broker Finding the best forex broker really depends on each trader's individual needs when trading the forex market. Knowing what to look for in the broker is really the responsibility of the trader. Getting a good broker before beginning to trade can make a big difference to a trader's bottom line, so do research in advance and choose your broker wisely.