Why a Broker Is an Important Decision
Ask yourself what type of company you would call if you should have a trade dispute. The purpose of this question is twofold. First, is it a reputable company that will honestly look into a trade in which you feel that you’ve been wronged? Second—and arguably more important—are its financials made available to the public and are they regulated? Both financial transparency and regulation are of paramount importance when it comes to how comfortable you should feel with your broker. As volatility has picked up in the foreign exchange market, we’ve seen undercapitalized brokers shutting down shop with little warning. This can leave traders in a significant mess. If you understand the financial positioning of your broker, you can understand whether he’ll be able to weather the upcoming storms and volatility in FX.
The Importance of Regulation
Whether a brokerage is regulated will determine who you can turn to if you’re dissatisfied with the resolution of a trade dispute. Think of it as a form of insurance. Of course, you hope that you’ll never have to use the policy, but you’ll sure be happy when it’s made available on a rainy day. Some of the most distressing calls I’ve received from FX traders are those coming about because an unregulated broker shut down overnight or refused to process withdrawals. The trader had nowhere else to turn when the unregulated broker refused to honor his side of the trade agreement. Now that you understand the why, it’s time to answer another important question: How do you do it? How does a new Forex trader or enthusiast go about finding a Forex broker?
