One of the most important aspects when starting a successful Forex trading career is to work with a broker who is not only skilled but trustworthy and is well respected within their field. In the Forex market, there are two types of brokers: regulated and non-regulated. As a rule of thumb, the key difference between the two types of brokers is the fact that the former is required to operate in a way that complies with the regulations set forth by a Forex regulator.
They must also be licensed and registered in the country where the business takes place and are bound to the standards of quality control set by Forex regulators. The reason why brokers that are regulated are bound by these standards is to maintain and secure decent, fair, and ethical behaviour within the trade.
The importance of regulations
In the case of brokers with no regulation, they are not as obliged to follow such standards set in motion by various Forex regulators nor are they required to be licensed or registered in the area they work at. This means they aren’t subject to quality control and are more likely to be a bit more flexible with their terms and conditions. Since they are not bound to regular audit and appraisal, there is a degree of risk when working with a broker that’s not regulated which can lead to a pretty unstable trading scheme.
While there is a degree of caution when dealing with brokers that are non-regulated, it is also important to note that this doesn’t always mean that they do not follow industry standards. Rather, non-regulated ones simply operate in a freer scheme than the rest since no one (especially Forex regulators) are keeping an eye on their operation methods.
What are some advantages that regulated brokers offer?
Understandably, many traders would prefer to work with a regulated broker aside from being a licensed professional in their field, they also provide several benefits like:
Offer a safety net - due to the constant monitoring of business transactions, a regulated broker is required to keep sufficient funds to complete their clients’ Forex transactions. Additionally, some brokers are also obliged to return some of your money should bankruptcy occur.
Less risk involved - constant monitoring and quality control ensures that money laundering doesn’t occur frequently which makes is safer for clients. Another is the fact that due diligence, constant documentation, and regular assessments are required to help keep track of how your funds are being used.
Reliable - while there arenon-regulated brokers who are respected in their field, the fact of the matter is that brokers who are licensed and subject to regular inspection offers a more reliable service that is especially useful for beginners who are just learning Forex trading.
Plan your investments
With these benefits in mind, it’s no mystery that many traders are more than willing to work with brokers. While not every non-licensed professional is a scam artist, there is a certain stigma that comes with working with a person who is not only free from scrutiny but may operate in a way that doesn’t have the client’s best interests at heart. Remember, when it comes to trading, risk management is an important strategy that we must always adapt regardless of how tempting such fees may be.