A broker provides all of the necessary tools that you use to trade. Since you also deposit your capital in their system, choosing the right forex broker is one of the most crucial things when you just start trading in the forex market.
In this first part, we will discuss how to choose a brokerage firm, or what is commonly called 'forex broker'. There is so many brokers we could choose to trade forex. Keep in mind that choosing a broker is your right as a trader.
Each forex broker has its own advantages and disadvantages. Brokers usually limit the trading system you could use, set certain limits for deposits, determine the facilities you could use for deposit and withdrawal, as well as the speed and duration of deposit and withdrawal processing. They also differ from one another on what kind of spread they offer, whether it is fixed or floated, and how much.
There are brokers who provide non-swap accounts (Sharia accounts) and there are brokers who don't. If you are a Muslim, you may want to choose the non-swap one and seek a broker who provides it. But ultimately, choose a forex broker whose approach suits your taste and financial condition.
Regulated And Unregulated Forex Broker
One of the main things to consider is whether they are regulated or unregulated. Regulated means that they are registered in one or more broker regulatory agencies, and therefore abide by certain rules. Each country in the world may own their regulatory agency; some of them are:
- NFA/CFTC category of Futures Commission Merchant or FCM (USA)
- Financial Services Authority - FSA UK (United Kingdom) category of Non-EEA (Non-European Economic Area)
- FSA (European Union) category of Non-EEA
- ARIF/Polyreg (Swiss)
- Bappebti (Indonesia)
- Securities Commission/SC (Malaysia)
- IDA/BCAC/OSC/CSA/MFDA/Investment Industry Regulatory Organization of Canada - IIROC ( Canada )
- Australian Securities and Investment Commission/ASIC (Australia)
- Financial Services Agency/Japan Securities Dealers Association /SESC (Jepang)
- Monetary Authority of Singapore/MAS (Singapore)
- DGCX/DMCC/DFSA (UAE/Dubai)
- Securities and Futures Commission/SFC ( Hongkong )
- CSRC (China)
- FSC (Mauritius)
- CySEC (Cyprus)
- SEBI (India)
- Seychelles International Business Authority/SIBA (Seychelles)
- FSPR NZ (New Zealand)
Are Regulated Forex Brokers Really Secure?
Actually, they don't, there is no guarantee that a regulated forex broker is really secure. They could be safe now but not necessarily in the future. Cheating can happen even in a regulated broker, as the allegation of fraud experienced by FXCM. Regulated brokers too, could collapse and bankrupt as in the case of MF GLOBAL broker and Lehman brothers. Moreover, we should be aware that although our broker is regulated, our funds are still unsafe from loss and margin calls.
Warning for beginners
A beginner should be careful not to put a large number of funds at once. Place the funds in a small number first. Don't be affected by provocation and misleading advertising.
If you are still a beginner, confess that. Choose a forex broker that suits your finance. Try not to use borrowed money for the trading funds. If you absolutely don't have excess funds you could use, seek brokers who offer free funds, or follow demo account competitions held by brokers.