In order to identify reputable brokers from shady ones, you need to do your homework before depositing a large amount of money with a broker.
The forex broker you choose is going to be your first critical decision as a new trader.
Because you’re going to be handing over money to this company!
So the first thing you need to make absolutely sure, especially BEFORE you make your first trade, is once you transfer funds to the broker…if you’ll also be able to withdraw those funds.
You might make the assumption that once your money is in your trading account that you’ll be able to trade with it and then withdraw it whenever you want to cash out your profits.
But don’t just assume this is true! VERIFY!
Never assume, always check.
You can be the most awesome trader in the world, but if your broker disappears with your money, then it doesn’t matter.
You’d just end up being the most awesome broke trader in the world.
If you want to stay awesome, but avoid being broke, then here are some important questions to consider before choosing a broker.
Is the forex broker a real company?
Don’t be fooled by a nicely designed website.
Make sure there’s an actual legally incorporated company behind that website.
Here are things to look for to verify that they are a real company:
Does the company have a physical office address?
Don’t be fooled by a listed address on their website. Make sure there’s a real office behind that address.
A simple way to check if the office is an actual office is to use Google Maps.
Enter the address in Google Maps and see what appears.
And to get a better view of the office, you can also use Google Earth.
Enter the address in Google Earth and see what appears.
Zoom in until you can see the building they’re in. Is it an actual office building? Or does it look suspicious?
If it looks like the building above, are you sure you really want to hand over your money with this broker?
If no building is present and instead, you’re seeing a warehouse on a tiny tropical island or even worse, an empty plot of land, you probably want to pass on this company.
Do you know who runs the company? Or is it a “ghost corporation” with no active employees?
Who are the principals of the company?
A principal is generally someone who holds a significant ownership stake in a company or has a formal title and ability to control the company’s activities.
For example, principals could be the founder (or co-founders), President, CEO, COO, CFO, other C-level officers, or any person or entity that owns 10% or more of the company.
Beware of “ownership-opaque” companies, where their true owners and/or company officers aren’t disclosed.
This lack of transparency might be due to the fact that it’s actually a criminal enterprise whose members wish to remain anonymous.
If you’re trusting a company with your funds, you should know the people who are in control of the company.
If something goes wrong, you’ll know who to hold accountable.
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