As a new forex broker your first challenge is to choose the right forex broker. It isn't as easy as it sounds and the whole searching process might leave you breathless. Due to enormous competition between forex brokers, they offer different features, exciting capabilities and outstanding advantages. However, along with the exceptional features you might find a potential weakness.
The weakness I am talking about here is whether your forex broker is a regulated entity. Forex brokers can be naughty and you might find it difficult to withdraw your profits if your forex broker is not under some kind of authority supervision.
What are those regulatory authorities? Let's list some of them here:
- National Futures Association (NFA)
- Commodity Futures Trading Commission (CFTC)
- Australian Securities and Investments Commission (ASIC)
- Swiss Federal Department of Finance (FDF)
- Escalade Incorporated (ESCA)
- Canadian Investor Protection Fund (CIPF)
- International Financial Services Centre (IFSC)
- Cyprus Securities and Exchange Commission (CySEC)
- The Financial Futures Association of Japan (FFAJ)
- German Federal Labour Market Authority (BaFin)
The next question you probably want to ask is how these regulatory authorities keep forex brokers straight. Here is the simple explanation:
Your broker is responsible for your money, whether deposited or profited. A Regulated forex broker is under a watchful eye of the regulator authority. In case something goes wrong with deposit, withdrawal or even with the trading platform, you can complain, sue or file an appeal regarding your forex broker. The regulatory authorities protect forex traders against fraud, scam and illegal trading practices.
Regulated forex brokers get homework which needs to be submitted to the authority. This so-called homework is the financial reports. If a forex broker fails to submit his homework, there is no second chance here - he gets an "F" and the regulatory authority either request a fine or, even better, remove them from their membership list.
The Regulated forex broker will not hide the fact that he is regulated and who is the authority. You can easily spot it on the forex broker website - either on the home page or at "about us" section.
The authority of a regulated forex broker is located at the country where the broker is registered in. For example, forex brokers which are regulated by NFA and CFTC are brokers located in USA. While any regulated forex broker registed in Swiss is regulated by FDF.
To summarize, trading with regulated forex broker gives you a security and protection you need as a forex trader.
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