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When selecting a broker, be sure to choose a regulated broker. A regulated broker can help you mitigate risk while aiming for higher payoffs.
Now more than ever, it is easy to set up your trading system or find a broker that can do it for you without paying top dollar.
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The issue is that using unregulated services comes with a high risk, more risk than you want to deal with when trading. So before you decide who to choose as your broker, ensure that you are choosing a regulated broker. Regulation offers assurance of legitimacy and comes with a fair amount of payoff right away.
You expect a lot from your broker, but at the top of your expectations should be transparency. You’re letting someone handle your money and make investments on your behalf, so you want to make sure they’re doing things right.
Regulated brokers must commit to conducting regular internal audits and be open to auditing from various regulatory agencies. These audits have a genuine impact on business conduct that affects traders directly. ASIC for the AU market has clear rules on securities handling and investments which direct auditing activities.
Trading is not gambling at a casino. However, there’s always a fair amount of risk involved in Forex trading. So, what do regulated brokers provide to help dampen the risk? Insurance. If your Forex trading goes under overnight, you can get some of your money back.
Financial authorities require regulated brokers to carry an Investor Compensation Fund for a worst-case scenario situation.
Anti-Money Laundering Practices
Money laundering is taking ill-begotten money and filtering it through a legitimate system or company to make money “clean” and disassociate it from the crime it came from. Unregulated brokers are known for allowing people to trade without proof of ID or any way of tracking where the investment funds originated.
Working with a regulated broker doesn’t mean that you have to show how you make your money. But regulated brokers do require you to verify your identity and provide proof of your address. For example, easyMarkets requires all users opening an MT4 trading account to submit a photo ID with proof of address to dissuade money laundering.
A lot of people find a “free money” claim appealing, but of course, nothing is free, especially in forex trading. When you work with an unregulated broker, they’ll often offer a lot of “free” benefits and then use bonuses to intervene on the trader’s deposit.
Then, when you go to withdraw, these unregulated brokers will demand to trade a preset volume for every dollar of bonus to withdraw. It’s a way of trapping traders and boosting the broker’s capital. Moreover, it’s outright trickery, and regulated brokers don’t use these underhanded tactics.
A risk warning is exactly what it sounds like. That is, a regulated broker must provide reminders of risk and alerts of dangerously high levels of risk.
When people start Forex trading, it’s easy to get sucked into the high-risk, high-reward game. A regulated broker can help you mitigate unnecessary risk while still aiming for higher payoffs.
But when you look at something as static as leverage options, a regulated broker can help guide you to avoid marketing schemes that lure traders with the claim of huge payoffs.