There is an abundance of forex brokers offering different spreads, bonuses, leverages and regulations. Forex trading is not easy and not all brokers are equal.
Apart from getting education, practicing on a demo account (even though it has its problems) and taking it step by step, you should also make sure it is not too easy to deposit money. Here is why and three things you can do.
Things should be smooth
Sure, a modern forex broker and a modern online company in general, should make it easy to get started. If things don’t work smoothly, you might rightfully suspect that also trading will not be straightforward and begin worrying about execution of trades. What impression will you get if life is made hard for you?
Also for the broker, a smooth process naturally means more conversions and more clients. Intuitive pages, clear explanations, a streamlined process and a website that responds quickly are all positive features, and this isn’t unique to the world of forex.
But wait
So can things be too easy? Well, in various cases, a new client needs to submit specific documentation. That naturally slows the process and could result in the client ditching the process altogether.
Well, if the documentation is not really needed, there’s no problem and it’s better to have this phase removed.
But what happens if the documentation is needed and the broker allows you to deposit money and begin trading before submitting all the data?
That’s where you should become suspicious
The problematic scenario is one in which you deposit money, begin trading and then you want to withdraw the funds. It doesn’t matter if you have made gains or losses in your account. Any trader should be able to withdraw funds upon request.
We have heard about some such cases in which the broker then “remembers” to ask for the documentation, making it hard or even impossible to withdraw the funds. A client can find himself in a “war of attrition” in order to withdraw funds that actually belong to him and not the broker.
Why wasn’t this documentation requested beforehand?
Asymmetric treatment to funds is worse than asymmetric slippage.
It is always easier to sign up for cable TV than to cut the cord. The same goes for cellphone or internet providers. In the post 2008 world, where regulation has increased and is sometimes choking the industry, it should be equally easy to deposit funds and to withdraw them.
Unfortunately, regulators are not always doing a perfect job on this front and it’s also our responsibility to do our job and examine: is the broker making it too easy to sign up?
3 things we can do
- Ask the broker directly, preferably by email: will I need to present documentation in order to withdraw funds? How does the withdrawal process work? As with couples, it is important to think about the divorce option before getting married, even if it seems very remote at that point.
- Look for information about the broker and specifically focus on withdrawals. There is a lot of disinformation on the web, so this should be taken with a grain of salt, but could still yield interesting results. If too many people complain about withdrawals on different dates, you can suspect that there is no smoke without fire.
- Read the small print: Yes, the letters are small, the text is long, and it’s extremely boring. But, remember that it’s your money and not just a Terms & Conditions agreement on social media. Place special attention to anything related to withdrawal or documentation.
Were you requested to present documentation before withdrawing money? Did you experience issues with your broker upon a withdrawal request?
Share
