Over the last couple of years, it has become clear that traders who want to be involved in the spot foreign exchange market need to be very careful in choosing their broker. Although finding a broker that is willing to put its customers first can be lot of work, it can take much of the stress out of trading. Unfortunately, the alternative is ending up with a less scrupulous broker that can make trading a chore or even put your money at risk.
Unlike trading on futures exchanges through a futures commission merchant, spot forex traders need to be aware at what point regulatory protections end, says Karen Wuertz, senior vice president of strategic planning and development at the National Futures Association (NFA). “If you look at the disclosure document that is required to be provided to all customers, it basically says that your deposits have no regulatory protections.”
So, how can you be sure that your broker is up to snuff? Just as you should when making any investment, you need to do some research before you even consider making a deposit with a forex broker. To help you, here is our checklist of seven factors to verify as you search for a new forex broker.