Many traders associate withdrawal failures with scam brokers, while in reality, the problems are quite common even in some top forex brokers. Why is that so?
If you are looking for a characteristic of forex broker scams, chances are failure to withdraw would come up as the top answer. In fact, many forex articles and tips stated that the withdrawal process is one of the top indicators that must be considered when you're looking for a trusted broker.
But what many traders don't know is that these failures are not the sole reason to determine whether a broker is a scam or not. Withdrawal failures can be caused by several other factors along with various ways of dealing with it too.
Easily ignored but actually critical, here are some reasonable factors that may lead to some troubles in the withdrawal process:
- Lack of Funds: funds in your account are lower than the minimum withdrawal amount
- Incomplete Documents: to prove that the identity they use to register with the broker belongs to them
- You Still Have Opened Positions: there are still active positions in your account
- Caught Up in Bonus Schemes: you forget to carefully read the terms and conditions before signing up
- Trapped in a Forex Scam: your broker is really a scam
To understand further about factors that cause your withdrawal to get denied, let's read more in this article.
1. Lack of Funds
The most obvious reason for failure to withdraw is the lack of funds in your account. If the funds in your account are lower than the minimum withdrawal amount or lower than the amount you wish to withdraw, then your withdrawal request can't be processed.
You may roll your eyes while reading this because it sounds self-evident and impossible to miss. However, according to Helene Berkowitz who has spent nine years working in the forex brokerage industry, a handful of people often miss something like this. In extreme cases, they even ask to withdraw $1,000 when there were only $25 in their accounts.
This situation could sometimes happen because of technical problems like typos in the amount of money that they fill out in the withdrawal form. If that's not the case, the next possible scenario is that the trader has calculated an unwithdrawable bonus (that can be used for trading but cannot be withdrawn) into their balance.
To put it simply, they basically mistook it as a part of their deposit, when in fact, those bonus funds cannot be withdrawn in any way. The bottom line is that before you file a complaint about failing to withdraw, make sure to check your balance first.
2. Incomplete Documents
Legally, every financial institution in any country is required to gather information about their customers or clients. For forex brokers, this personal identification data usually consist of the client's ID card and proof of residence.
While some brokers can ask for a few other documents, but the point remains the same: clients are required to show their documents and prove that the identity they use to register in the broker really belongs to them and comply with the current Anti-Money Laundering policies.
These requests are necessary and legal, so it's not an attempt to complicate matters but safety precautions and a part of the broker's procedures.
There are differences in practice for each broker; there are some brokers that request the documents before the client register (and do not allow clients to trade before uploading them), and there are others that only ask for the documents when the client wishes to withdraw some funds.
As withdrawing funds is basically transferring money to someone's account, legal documents for verification is absolutely required to make sure that the fund does not fall into the wrong hand. It's only normal if the broker would not process your withdrawal request if you can't complete the verification.
3. You Still Have Opened Positions
It is well known that forex trading is very dynamic, so a trader's equity will fluctuate in line with the changes in the price movement. If you wish to withdraw while there are opened positions, it could be harmful to the broker. Who knows where the price may go while the broker processes your withdrawal? Considering how volatile the forex market is, your balance can be positive now then turn negative at the next moment.
Therefore, most brokers do not allow traders to withdraw funds when they still have opened positions. Helene Berkowitz likes to imagine this situation as "trying to slice bread while the dough is still in the oven". In other words, it is something that can't be done. In order to withdraw, you must make sure there are no active positions in your account.
However, Berkowitz noted that certain brokerage companies try to hold client funds by keeping the account active in order to maintain the sustainability of the market (to protect the liquidity). Although that method is technically legal, many people see it as unethical because it looks like the broker is trying to prevent their clients from withdrawing.
4. Caught Up in Bonus Schemes
When choosing a broker, many traders are attracted to bonuses and other types of rewards. Sadly, most of them forget to carefully read the terms and conditions before they register. Previously, we have mentioned that there are bonuses that can't be withdrawn from the account. Otherwise, it may require a huge number of lots traded before the funds can be withdrawn.
This can be seen as a broker's trick to hold the trader's funds as long as possible while indirectly forcing you to overtrade. But does that mean the bonuses are not real and the broker is tricking you? Not necessarily. Just don't underestimate the terms and conditions of promotions (including subtle writings in the footnotes).
Read it carefully and make sure you don't mind fulfilling all of them before signing up for a bonus.
5. Trapped in a Forex Scam
Many people would advise novice traders to keep a lookout for brokers that do not allow their traders to withdraw because it might be a scam broker. On a certain level, that is true. You can tell if a forex broker is a scam if your withdrawal request is not followed up properly for days or even weeks despite the withdrawal submission according to the procedures.
The suspicions can further be confirmed if your repeated questions and requests for explanation go unanswered, or if your request is responded to in a convoluted manner by the customer service with various excuses such as the account is frozen or other ridiculous reasons to the withdrawal.
There are many ways a scam broker can do to stop you from withdrawing your funds. For instance, you could deposit $100,000 USD in your account and get a $1,500 bonus. Let's say at some point you lose and wish to withdraw the remaining funds. In this case, the broker may say you can't withdraw the bonus funds even when you still have some money left (not including the bonus).
Ways to Avoid Broker Withdrawal Issues
If you want to prevent failed withdrawals, your effort should start from the very beginning. This is not a simple task especially for rookie traders, because there are many things that you should take into consideration. After all, withdrawal process deals with the real money in a real account, not like in the forex demo account where you trade with virtual money.
Remember that forex trading is already hard and not free of risks in itself, let alone when a broker implements practices that work against the trader; making a profit can be nearly impossible. If your broker is trusted, at least you don't have to worry about losing your money to foul practices and scams. Instead, you can focus on maximizing your trading performance and withdrawing your funds anytime you want to.
1. Do Your Research
Do online research of the broker. Not only do you need to know what types of payment methods are available, but you also need to read all of the fine prints of the documents before you register. Ask customer service about the procedures and conditions for withdrawing funds if necessary, especially when the information is not available on the official website.
In this case, communication is vital. If you don't receive any response from the customer service or the answers seem very vague, it may be a red flag because a good broker should be helpful and listen to their clients.
As a part of your research, reading testimonials from other traders that use the broker is also important. It can provide useful insights into the credibility of said broker. However, you need to watch out for the tone of the reviews. Many broker testimonials are in fact filled with subjective testimonials that can be abnormally positive or extremely hateful beyond reasons.
If you are satisfied enough with your research, you can register and open an account. Make sure to follow all the procedures and watch out for typos when filling out forms when attempting to make a withdrawal. If everything goes well, then it's safe to continue trading. Start trading in a small amount first, then gradually increase your trading size once you trust the broker completely.
2. Withdraw Your Funds Regularly
Even if your first withdrawal was a success, it is necessary to withdraw regularly. Don't let the funds build up too much in your trading account. Many traders deliberately "accumulate profit" in their trading accounts in hopes of compounding. But this behavior can tempt the broker to manipulate you so that you can't withdraw a large sum at once.
The broker can do it in many ways. They can place unilateral orders without your confirmation, make excuses to cancel the profit, or accuse certain violations and make you pay the penalty. These actions are quite common, especially in unregulated and Dealing Desk brokers.
While trading can be challenging in itself, trading with a bad broker is much worse. Being able to withdraw funds at any time is one of the most fundamental matters that you need in a broker. When things go downhill, it is best to secure your money before you start again. Once you are stuck with a bad broker, you will be left with nothing but regret. That is why you should be very cautious when choosing a broker.
4 Comments
Nov 17 2022
I think good brokers don't have problems with failed withdrawal situations. You can say it at the beginning of the article, lack of funds, incomplete documents, opened a position, caught up in bonuses. All of this is due only to the negligence of the trader and not the fault of the brokers. I think it's very rare for traders to forget all that you said. In other words, I really disagree if I have problems withdrawing without rating brokers so quickly. Point #2, Usually when we initiate withdrawal, if we have not filled our bank details yet, we will go directly to the bank details registration page to avoid failed withdrawal. Lack of funds, of course, the trader also knows the details of the fund or still has an open position. but I do Agree with point no 4, as always some brokers do give some bonus deposit and some traders dont read the agreements. Usually about the target of profit or volume of trading, if the traders dont fulfilled the terms. They can't withdrawal their funds. For me, except point no 4, if the withdrawal fails I will directly suspicious that I caught in point no 5 and I guess it's a red flag signal and we need to stop trading until we get our money back and get rid of these brokers.
Dec 7 2022
Apr 6 2024
Hey there! I want to ask some questions here. So, What are the potential consequences for brokers if clients request withdrawals while still holding active positions, as mentioned in the article? How does the requirement for traders to close all positions before withdrawing funds affect both brokers and traders? Could you elaborate on the factors contributing to the complexity of withdrawal processes within brokerage firms, and how do they influence the relationship between brokers and traders? In what circumstances might traders urgently need to withdraw funds, and how does a policy mandating closure of all positions before withdrawal present challenges in such scenarios? Lastly, how do brokers navigate the balance between safeguarding their financial stability and ensuring prompt and efficient access to funds for traders?
Apr 10 2024
Hey there too! Let me answer your questions with simple answer! So, basically, if clients want to withdraw money but still have trades open, it can mess things up for the broker. It's like, imagine you're trying to take money out of your account, but you still owe some on your credit card—it's kinda like that. And then there's this rule that says traders have to close all their trades before taking out cash, which can be a pain, especially if they need the money ASAP. It's a tricky situation because brokers need to keep things stable financially, but they also gotta make sure traders can access their money when they need it. So, it's all about finding that balance between keeping everyone happy and making sure everything runs smoothly.