Forex is one of the most volatile financial markets and involves a lot of money, changing hands. However, it would be highly erroneous to assume that there is no serious set of regulations controlling the market. As a distant observer of the happenings in Forex, (not related to the market in any capacity- either as traders or as forex affiliates), you might as well be thinking that it’s a highly unrestrained trading platform where traders might end up winning/losing very big depending on their luck. This, perhaps, is one of the biggest misconceptions. Forex is NOT about luck but precision, a keen understanding of the market and calculative speculations. Unsuccessful traders lack most of these qualities and therefore lose big. It doesn’t really mean that the market is not regulated. As much as it is likened to gamble, know for a fact that this trading platform is governed by a strict set of laws. Go further through the post in a bid to know more. There are several official international bodies who guarantee that the traders stick to these rules. However, considering that the entire transaction is conducted online, it becomes a bit difficult to regulate the situation and there are always investors, who flout these norms and still get away with it.
However, if you are mulling a shot at online trading, make sure that you’re going through this post even before opening your forex demo account**. **
A Basic Understanding of the Regulations: Why they are Formulated
These laws had been formulated with a view to boost exchange system management. They also aid in the preservation of parity in the balance of payments, thereby encouraging sound economic growth. These regulations influence all activities related to payments and receipts
What are these laws?
- A broker, dealer or service provider operating within the forex industry should have a valid license in the country where these operations are being conducted. As a trader, if you’re working with an unlicensed broker then you are definitely flouting the law
- The representatives are not supposed to solicit business with customers without intimating them about the risks involved in the market. Be on your guard against brokers who guarantee profits in the business. No FX trader can ensure full proof measures against failures or huge profits.
- The involvement of the national regulatory authorities ensures that the brokers are maintaining stringent quality control standards and that your business with them is transparent and secure.
- In a bid to ensure that these brokers are offering services that comply with the industry standards, the practices of the licensed brokers are audited and reviewed periodically.
- The contract entered between the investor and the broker should be honored by the latter. Each and every position opened by you, should be respected (in keeping with the FX laws)
Conclusion
As a potential trader or investor, it’s your responsibility to educate yourself about the prevalent forex laws as much as it is essential for the brokers to follow these rules. In order to secure more information about the foreign exchange market, please visit websites like www.orbex.com and www.dailyforex.com.