Forex Brokers

Now it’s time for a warning about Forex brokers. In my reviews of the Forex brokers available, I’ve discovered some which you would not want to trust your money to. Some operators seem to make a habit of giving less than good service, even to the extent of opening new brokerages in new countries under different names.

Brokers fall into two basic categories – those based in your area who would come under the laws and regulations of your country, and those based abroad who would be difficult to pursue legally if they did not comply with your wishes. One of the first criteria I would look at is the ease or otherwise of obtaining a remedy should you develop a dispute with them.

Don’t always trust what the broker says on the website. One broker who defrauded a client gave a US address that turned out to be a residential property in foreclosure. You should be able to check the broker is genuine by looking him up with a trade association or with the Better Business Bureau. And it’s probably worth calling any phone numbers given to make sure they are answered in the name of the company, and are not just answering machines.

Certainly, there are also legitimate reasons for being based offshore, such as taxes and the climate, so I am not suggesting that such brokers are not to be trusted in general. It’s just that if a broker is up to no good, it would be harder and more expensive to prove it from afar.

You might think that the internet would be a good means of collating user opinions of the different brokers so that you can find out who is any good. Don’t trust the majority of information that you can read online. A New York based broker was found to be acting improperly by arranging for many false favorable posts to be made about them, as if from independent traders. From the other point of view, it is common for someone who loses money to try and blame the broker, and there are many complaints of scams online, not all of which are justified.

In some cases it is possible to find authoritative reasons for avoiding certain brokers. Recently I have come across one broker which announced it was moving from Belize to the European Union because the majority of its business was there. On investigation, it turns out that the licensing authority in Belize had issued a letter a couple of months previously saying that the broker was no longer licensed to operate there, so the positive spin about the move was a sham. Certainly it is worth checking with the authorities before placing much money with anyone.

Often the offending brokers have user friendly software, frequently sourced from MetaTrader or ACT Forex, and their operation is smooth and uneventful until you have built up a profit and try to withdraw it. While you should be aware that international anti-money laundering rules can affect how and where they are allowed to send the funds, some brokers are crooked and will not send the money out.

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