There is one word that a lot of the world’s population associates with the financial world. That word is ‘greed’. The collapse of the markets a few years ago did not help, but the financial world was linked to that word for years prior to this anyway. It is only once a few stories appeared on news channels around the world that confirmed people’s attitude once again. The same greed exists amongst a select few Forex brokers. They do not care who they sign-up, as long as they make a profit.
Unfortunately, there are a lot of new traders out there that don’t see this and they simply consider all Forex brokers to be their ‘friend’ as long as they provide them with a trading platform and cheap spreads. The truth is that there are many Forex broker scams operating in the financial world and the point really is to try and avoid these scams by being as far away from them as possible. Experience will teach those who have been trading for years but new traders may struggle to know right from wrong in this subject matter.
The best way to start getting away from such scams is to ensure that your Forex broker is regulated, and not by just anyone. What you may find is that a lot of scam Forex brokers operate from countries where regulation is quite poor or in those where there is no regulation. These countries tend to not be financially advanced so they are prepared to let things slide. However, to create a security cloud around yourself it is essential that you trade with Forex brokers who are regulated by a body that is focused on the financial world. For example, there is no point of operating with one that is being regulated by a regulatory body that is focused on legal issues only. There is no security being created here unless it is linked to the legal issues that are specific to the financial trading environment. On one hand it seems that we are safe because we are ‘legally’ protected but on the other hand it could be just a sugar coating that may not provide real protection when it matters. If there is no regulation specific to the trading industry or the financial world, it is better to find a new one.
One thing that you must also bear in mind is that regulation is not standard in every country. Even in financial powers such as the UK and the US, regulation is not the same. However, they are very strict and with the evidence that we have seen on the news channels around the world, greed is eventually caught up with and participants face heavy fines or jail sentences. The point is that these countries are very serious about their regulation. Historically, Forex brokers that were looking to ‘rip us off’ were based in countries where they receive huge tax reliefs but that is now changing as they move into countries where there is regulation, but not at the same level as that of US, UK and other heavy regulated European countries. Despite providing regulation, it is not as heavy and there are no resources to follow up any bad doings. Nobody really knows about the relaxed state of regulation so Forex brokers tend to mask themselves as a well established regulated company. The truth is regulation itself is not enough; it is the rules and enforcement of regulations that should provide us with the security that we need.
Guest post by Dragan Lukic of www.capexforextrading.com
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