If you’re looking to trade forex, it’s crucial to identify TOP Forex brokers https://topbrokers.com/forex-brokers in 2018 that are reliable and to avoid the ones that are not. And to do this, we must go through a series of steps before depositing a significant amount of capital with a broker.
Separating Forex Fact from Fiction
When making inquiries for a potential forex broker, traders must learn to separate fact from fiction.
It is common practice for inexperienced traders to panic; they fear to miss a move, so they hit their buy key, or fear losing more and so they hit the sell key. That results in sharp movements and slippage.
Communication Between Broker and Trader is Important
Not receiving responses from your broker is a typical red flag that a broker may not be looking out for your best interest.
Steps in Conducting Broker Research to Protect Yourself
- Do an online search for reviews of the broker.
- Make sure there are no complaints. If there are, contact the user if possible and ask them about their experience.
- Read through all the fine print of the documents when opening an account.
- If contented with your inquiries on a broker, open an account with a small amount of capital.
Note that a broker’s size cannot be used to determine the level of risk involved.
Is Your Forex Broker Churning Commissions?
Brokers paid commissions for buying and selling securities could at times yield to the lure of effecting transactions just for the sake of generating a commission. Those who do that can be found guilty of churning and can face fines.
SEC has defined Churning to mean a situation where one’s broker engages in disproportionate buying and selling of securities in the persons account mostly to make commissions to the broker’s benefit. Churning is unethical.
If you call the shots, and the broker is following your instructions; then that isn’t churning!
Evaluating Your Trades
One of the most evident signs of churning can be when you see trades for securities that don’t fit your investment goal.
How Regulators Evaluate Churning
An arbitration panel will examine the trades placed in light of the client’s level of experience and the nature of the client’s relationship with the broker. They will also consider the number of solicited against unsolicited trades and the dollar amount of commissions generated as compared to the client’s gains or losses because of these trades.
What If Stuck With a Bad Broker Already?
Here are some things you can do:
- Go through all documents to be sure your broker is genuinely in the wrong.
- Discuss your course of action if the broker does not adequately answer your questions. Steps may include posting comments online, reporting the broker to appropriate regulatory body in your country.
Many retail Forex traders enter the market unprepared. That is bad and cannot be attributed to fraud activity by a Forex broker. However, scam brokers do exist. Below are some warning signs to know if your Forex broker is secretly scamming you:
- Slippage is where a trader’s entry order is filled in at a paltry price than his projected execution price.
- Stop hunting
- That happens when a broker triggers a trader’s stop-loss even when the actual market price is still a few pips away. If you notice this persistent stop hunting pattern, it shows that your broker is a scam forex broker.
- Arbitrary account closures without valid reasons
- Non-payment of trading profits
- Freezing platforms
If you notice any of these red flags, then it’s time to look for another broker.
While traders may blame brokers for their losses, there are times when brokers are at fault. But, if you are already in a knotty situation, find out if your broker is carrying out illegal activities, and attempt to have your questions answered and, if all else fails, report the broker to a regulatory body.