Wednesday, October 14, 2020 / 11:00
AM / Sponsored Post / Header Image Credit: Axios Holding
In 2016, the forex trading market saw an average of $5.1 trillion in trades per day. With that much money going back and forth around the world, it begs the question - does having a regulated or unregulated broker matter?
For most forex traders looking to trade and even make a living legitimately, it does matter.
Although forex brokers are doing the same thing, providing a platform and a service for forex traders, is there a difference between a regulated and unregulated broker? We dive further into this question to show why there is a difference and why using a regulated broker is in your best interest.
Regulated vs. Unregulated: The Difference
The main purpose of having a regulatory body in the forex market is to prevent fraudulent activity from occurring. Because the market deals with foreign exchange daily, it's essential for the trader's safety to have regulations preventing fraud.
The regulatory body also withholds the standards and regulations put in place across the board. This means any brokers that do not follow the regulations could get audited, have legal action taken against them, and even lose the validity of their license as a broker.
An example of an unregulated broker is Hugosways. Although it is in the process of applying for a license, it still remains unregulated. Because of this, it can often get involved with more-shady forex trading.
Benefits of Using a Regulated Forex Broker
Security and Safety
One of the top benefits of using a regulated broker is the safety and security behind it. As mentioned above, unregulated brokers pose the risk of getting audited and even having legal action taken against them. If you have money within an unregulated broker, how much can you guarantee its safety?
Honesty and Transparency
Working with an honest and transparent company is an essential perk to have, especially if you're working with quite a bit of money. As the trader using the brokerage service, you want to know what is happening with your money and that you can access it at any time.
An example of a regulated broker is FBS (you can read more from this FBS trading review). Since they are regulated and having the proper licensing, you can be more confident that your morning is safe.
Safe From Fraud
Another benefit of regulated brokers is the protection from fraudulent activity. Typically, regulated brokers do not risk losing their license, reputation, and position on the market as a trader, which means the chances of being involved in fraud are minimal.
Regulated brokers won't cause issues within the platform, change the prices, withhold client funds, or do anything that would work against their clients. The result for the client is a trusted broker that poses no cause for concern.
Even with all the benefits of using a regulated broker, some prefer using unregulated ones. Although they pose a higher risk, they come with more considerable leverage, leading to a larger payout. However, with no protection with unregulated brokers, the risk ends up being far greater than the reward.
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