Forex has its rewards, and there are a lot of drawbacks, too. Traders can make a ton of money, or they can lose everything with a fraudulent broker. There are always risks involved in trading, but when working with a broker that’s a scam, the odds are stacked against you.
1. Proper Regulatory Control
Brokers must offer proper regulatory control. The regulatory body will vary from country to country, but some of the most important are:
- NFA, CFTC – USA
- FCA, PRA – UK
- ASIC – Australia
- AMF – Canada
- AMF – France
You want to make sure that your broker is a member of a regulatory body. There are several regulatory bodies across the world, so do your research on your broker’s regulatory membership prior to conducting any trades.
2. Deposit And Withdrawal Policies
The brokers that give the forex industry a bad name are the ones that have vague deposit and withdrawal policies. A lot of the times, these brokers will not allow you to withdraw your money, but they will always allow deposits.
If your account is in good standing, there’s no reason not to allow you to withdraw the money you earn on a broker’s platform.
Brokers have a tendency to make it easy to deposit money and very difficult to withdraw your money. If you find this to be the case with your broker, it’s a good idea to stop trading.
3. Transaction Costs Add Up Quickly
Investors make trades to make money. Every investor goes into a trade with the hopes that they’ll be able to make their money work for them. If you go into trading to pay high transaction fees, this is counterintuitive.
All trades require one of two payments:
You’ll want to find a broker that offers a low transaction cost. Review all of your options and don’t be afraid to switch brokers. If you have a high-volume account, you may be able to negotiate a lower transaction cost, too – just ask.
4. Customer Service
What’s one thing you need when using any service? Good customer service. It’s easy to avoid the importance of customer service when you don’t have a problem. Everything works very well until it doesn’t.
If you have an issue, who will you call or contact?
I recommend contacting customer service before signing up for a broker. The idea is to see how helpful customer service is when you haven’t deposited a dime into your account. Don’t be afraid to use online reviews to verify the quality of a broker’s customer service either.
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