Continuing our discussion on finding the right forex broker to trade with. Here are more suggestions.
If you want your money to be safe, trade with a regulated broker that physically operates in the country you live in.
Forex brokers who operate outside your country and in foreign jurisdictions are not always legally required to maintain licenses with regulatory bodies.
This is especially true in offshore jurisdictions, where governance is weak or doesn’t exist.
If the regulatory agency, the broker, and you are all in the same jurisdiction, it will protect better you.
This is because you can report your broker to the regulatory agency if you feel you’re being cheated.
If the broker doesn’t have a physical office in your country and/or isn’t regulated in your country, you are most likely going to find no legal recourse if something goes wrong.
Be careful of “regulatory arbitrage“.
This refers to forex brokers attempting to benefit from differences in regulation between jurisdictions.
For example, a forex broker operating in a strict jurisdiction may establish a separate company (subsidiary) under the same brand in an offshore jurisdiction that has more lenient regulatory requirements.
The broker then directs its customers to transact through that subsidiary.
For example, the broker may flaunt an EU or UK license to assure you it’s “safe.”
But then open your account with the offshore subsidiary.
If you open an account with a broker, make sure they open the account under the jurisdiction that you specify.
Don’t let the broker choose for you.
Or you might give up your regulatory protection.
So you’re interested in a forex broker and BEFORE opening an account, you’ve done your research.
The broker looks safe so you open a live account.
You probably have an amount in mind that you want to deposit.
Don’t do it just yet.
Take the broker for a “test drive” first:
This allows you to test how easy the process is to get money in and out of a broker.
How long did it take to process the withdrawal?
It shouldn’t take more than 24-48 hours.
If it takes so long that you actually have to follow up and bug the broker about your withdrawal request, beware.
If everything goes well though and you’re pleased with the test drive experience, you can then deposit a larger amount.
By the way, if you start receiving phone calls from the broker trying to “encourage” you to deposit additional funds into your trading account either before or after you request the withdrawal, that’s not a good sign.
It’s fine if the broker is reaching out to see if you need help using their trading platform, but you should wonder why they’re already trying to get you to add more money and trade more.
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