Some currency trading brokers offer more than they can deliver, including guarantees on execution, high returns and account safety.
Some have engaged in outright fraud, misappropriating customer funds and selling illegal futures and options contracts.
Although there are many success stories of rags to riches in the online currency trading market, there are just as many about those who have lost everything just as fast. And many have been defrauded.
So finding a reputable forex broker is crucial. The more a broker tries to convince you that your funds are safe, or that the risks of forex trading are minimal, the more skeptical you should be. All trading is risky and any broker who tells you otherwise is lying, and not a good sign for any kind of relationship, especially one that involves your money.
You need to be wary of specific claims about safety of funds, such as your funds are FDIC insured, your funds are held in segregated accounts, for all intents and purposes, that’s not true. Funds deposited in brokerage accounts are not insured and probably would not receive priority in bankruptcy.
You should verify if the forex broker is an NFA member and registered as an FCM with the CFTC, and find out how much excess capital the company has. The minimum required by the NFA is $250,000. Claims of guarantee execution should also be a red flag. Because there is not one central market place, these claims are usually followed by an asterisk. Read the asterisk, its important to know how your broker is going to react. They should have a fast market policy as well as a margin policy.
Make certain you know how your broker gets paid. Some forex brokers claim no fee trading and make their money by charging a 3 to 5 pip spread on the major currency pairs and slightly more on exotics. Brokers who claim to charge less may be making up for lost profits by charging a commission or constantly requoting. Other red flags include pressure to commit more money than you are comfortable with, demanding long term agreements and limiting your access to the account. You should have real time access to your account 24 hours a day 7 days a week, and also find out if anyone else has access to your.
Read the account agreement. Make sure you have the right to close a trade by entering an offsetting position, otherwise you may end up purchasing the entire amount of the currency. Brokers are considered market makers and therefore the counterparty on all trades. But the broker themselves should never take the other side of the trade, that’s when you are going to see the game playing and the slippage.
Customer service is the other issue you need to research. Call the broker on the phone, send them an e-mail, and use the brokers chat function to see how responsive the broker is to its customers.
Don’t wait until they have your money to find out how they are going to treat you.
P.S The secret to making 6 figure income in Forex is avoiding the "account blow-up"- the heart of our training uses a powerful Forex Trading Business Plan; ... Don't miss out! The Free Forex Video Series reveals the ultimate Forex Business!l