How To Detect A Reliable Broker From A Bad Actor?
If you think of becoming a trader, start your carrier not with learning the Forex basics but with learning how to distinguish trustworthy brokerages from shady operators.
Despite the Forex landscape is getting better regulated and audited, the number of fraudulent brokers is still overwhelming. This sad fact prevents many enthusiasts from trying their skills on foreign exchange trading, and, consequently, from having a steady source of income.
If you entertain a thought of becoming a Forex trader, the first thing you should learn is not the trading basics but how to tell trustworthy brokerages from shady operators. We will teach you how to find a good broker from such a huge selection and steer clear of scammers.
Divide fancy from fact
There are enough forums and broker rating portals on the Internet where disappointed traders swear at their brokers and write negative reviews about them. If you rely on real-user reviews and ratings about brokers, you should be able to differentiate truth from false. The matter is most frustrated traders tend to accuse their brokers because of own unsuccessful trading strategies.
Traders may think that the broker purposefully tries to make the client lose money. Complaints like: “As soon as I took a position, the trend of the market reversed again” or “I often experience slippage of positions but never in my favor” are commonplace on Forex forums and broker rating sites. But they do not indicate that it is the broker’s guilt.
Novice traders are often unable to trade a proven strategy or an adopted trading plan. Instead, they rely solely on their intuition when opening a position, which is often fatal. If a trader does not comprehend the market movement, it is not the point to put blame on the broker. Slippage can seldom be associated with a psychological phenomenon – a mass panic of inexperienced traders in unstable situations. Hence, reading reviews about brokers may be misleading. What traders call a fraud oftentimes is just misunderstanding of the market behavior and the wrong choice of trading strategy.
Dishonest broker: a real problem
It is a red flag if there is no connection between a trader and a broker. If a trader does not receive precise answers to the asked questions via email or phone, or if a brokerage firm gives unclear answers and does not try to solve a trader’s issues, it is, surely, a wake-up call.
A good broker is always ready, able, and willing to tackle the slightest problems their client may have and via all communication channels: email, phone, Skype, social networks.
How can beginner FX traders protect themselves?
This guideline is to help you to winnow trustworthy brokers from unfair ones:
- Look for the broker reviews on the Internet and filter them. Perhaps, some of these reviews may be written by disappointed traders in the heat of emotions without analyzing own trading strategy.
- Make sure that none of these broker reviews speak about withdrawal problems. If there are some, feel free to contact the review author and ask for details.
- If you cannot find negative reviews about a broker on the broker rating platforms but still hesitate to make a decision, go to the broker’s official website and read the user agreement. Pay special attention to the bonuses the company offers. Sometimes these incentives are very tricky and can be used against a trader when it comes to withdrawing the earned money. For example, the trader deposits $1000 and receives a bonus of $200. Suppose the trader chooses an ineffective trading strategy and, as a result, loses the most of the deposit but tries to cash out remaining funds. Sometimes the broker may refuse to withdraw money upon the pretext that the bonus cannot be paid out as stated in their user agreement.
- If the company looks dependable, open a standard account with them depositing a minimal sum. Trade this money during a month or so and then apply for a withdrawal. If your order is processed without delays or other obstacles, and the broker representatives are always online to provide assistance, do not fear to deposit larger sums.
Traders tend to put blame on brokers rather than to admit their own misunderstanding of the FX market laws. Generally, brokers are not in fault of your financial loses.
A trader should do thorough research prior to opening an account with a broker and never pour a lot of money into the very first deposit. If everything goes well and the broker smoothly processes withdrawal orders, it is time to trust larger sums to the company.
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