Regulatory Institutions and Reliable Brokerages
Seventh session of Forex Training
Welcome back to Forex professional training in financial markets.
In this session we will discuss about regulatory institutions and reliable brokerages as well as terms of broker’s accounts, choosing different account types based on transaction value.
An essential item when it comes to choosing a broker is their reputation. Regulatory organizations that provide brokers with licenses are called regulators.
The part that is linked to the stock market is controlled by the stock and bond share organizations. All public and private brokers start their work with a license supervised by this organization.
NFA, FCA, CYSEC
There are regulators all over the world who offer licenses to companies that are working within financial markets. Some examples of such companies are:
The NFA (National Futures Association), which is linked to the United States.
The FCA (Financial Conduct Authority), which is linked to England and the European Union.
CySEC (Cyprus Securities and Exchange Commission), which is linked to Cyprus and the European Union.
Every country has its own regulatory body and regulators’ liabilities are to provide brokers with licenses and monitor their activity.
These regulators monitor transactions, trades and activities between investors and brokers to investigate any suspected regulation violation profoundly.
More than 480 websites are working in financial markets from all around the world.
Every month some brokers are added to this list and some are removed, meaning parties must be careful and astute when choosing their brokers.
You will be able to find brokers’ license information on brokers’ website, as well as check if this information is valid.
Most websites of such organizations will display the license information on the same page of their websites
Some brokers, like IRONFX, have different regulators and that is because the number of their customers is so high. Also, as you can see, they have offices all around the world.
At the bottom of their page you can see all the different types of licenses that they require and possess.
How to Choose a Broker
In order to select the correct broker for you, there are several things to consider.
The broker must be regulated and have a valid license from their regulator or regulators.
The broker must have been active for at least 5 years, meaning they must have been actively working within the market for 5 years.
The broker must be trusted enough to leave some of your capital with them for trading.
The broker must have a range of customer support services available, as well as a direct phone line services so you can easily contact them.
They must have a variety of payment methods for depositing and withdrawing capital, especially those types with the lowest charge rate for customers.
They must have a very simple agreement for withdrawing capital and no withdraw-able limit.
You must make sure that you understand the terms and conditions of withdrawing money from an account with your prospective broker.
Some brokers do not permit their clients to place an order in a certain time and spot where market is highly volatile.
The broker must be honest and transparent in business, which means the broker must not have any complaints or violations against regulations for depositing profit or any other activities, they must also have a base of clients who are happy with their services.
If your broker fits all these criteria, you can safely say that you made the right choice.
Choosing an account
Now it is time to choose the right account. There are many things to consider in choosing an account.
You have to know the minimum required deposit to open any of the provided trading accounts, as well as available lot size on the certain trading account concerning your trading method.
What is the highest and lowest leverage provided by the broker?
What are the available symbols from this broker?
How many and what types of trading accounts that broker offers, such as fixed accounts, floating accounts, ECN accounts, STP account or NDD accounts.
We will explore all these accounts in detail in the following courses.
Do these accounts have swap or are they swap-free?
Is the selected trading account in harmony with any trading strategies that a trader uses?
To which term is trading account attuned? Long-term, medium or short-term?
Most brokers offer services for a long- and medium-term trades; however it is essential to check before opening an account whether the broker provides services for a short-term, known as scalping, trades or not.
The account must provide hedging trade. Some trades require hedge or hedging which will lock the margin. Some brokers, when you buy and sell simultaneously, will unlock the margin, which makes it very easy for you to do other trades.
But others will lock certain amount of your margin in the hedge trades.
An account can also be chosen based upon the desired lot size of trades.
The first type is a Nano or Cent account in which the minimum size of a lot in trade is one over 1000 or 0.001.
As we have explained previously, when we trade with accounts with USD as a base, profit is not considerable and this will lead to having many open orders.
These accounts are suitable for those traders who like to have multiple open trades simultaneously, usually more than 100 trades. Traders normally deposit 10 to 200 dollars in these accounts.
Likewise, these accounts are beneficial for traders who would like to test certain strategies or Experts.
The second type is Micro or Mini accounts.
The lowest lot size you can trade in these accounts is 0.01 lot. They are usually convenient for beginners, and parties who would like to have trades with high PIP and do their trading with high risk.
Parties usually invest between 50 to 200 dollars in these accounts.
The third type is a standard account. Lot size starts from 0.1 lot and professional traders and investors with great deal of capital are attracted to these accounts.
The minimum amount to invest in these accounts is 1000 dollars.
That concludes this session, until next time and another session take care.