Choosing a broker: how not to make a mistake

Different investors, or traders, search for their reliable forex broker using different scenarios. Some of those scenarios are successful, some of them are not. It can be noted that all reliable companies are equally stable, yet scammers, on the contrary, are elaborating their specific loopholes for deception of their customers.

Like finding a partner on a dating site, for serious, long-term and stable relationships, traders are looking for a reliable platform for financial investments and profitable trading. At the same time, they also hope that the relationship will be serious, lasting and stable. Officially, preferably. Ideally, mutually beneficial.

Therefore, the candidate forex broker must be thoroughly checked for reliability and prospects, having studied all the data about the company. A decision should be made based on the analysis, preferably with a cold mind.

Part one. Site


Just as looking at the profile picture of the potential dating partner, the first thing we can do is analyze the forex broker’s site.

And at the first and subsequent acquaintance, the broker’s site may evoke sympathy and trust. It can contain slogans to the extent of pathos, to the extent of populism. Excessive modesty with self-promotion can indeed be excessive. How else would a potential trader become interested in this particular partner?

The broker’s site can contain information on the types of accounts available on the first page, and figures for analyzing their attractiveness for different groups of investors. But it’s worth trying to dig a little deeper and analyze the information about the broker in detail, so that later it will not be excruciatingly painful.

Part two. Trading Conditions


Without further ado, most brokers immediately declare, on what terms and with whom they are ready to while away their time. Well, everything is fair enough. For the basic trading account, investments are less, and the profit is correspondingly less, and the risks are greater. For bigger fish leverage is more serious, and there is the possibility of trading bitcoins, and deposit insurance is provided. And for serious investors, the floating spread may increase to 0.3 points and deposit protection is offered.

Most brokers claim to offer their customers the best liquidity providers. But they modestly do not indicate which liquidity providers they really offer, and by what criteria the degree of superiority was determined. Just the best. Just believe it.

But this is not the most alarming thing when analyzing trading accounts. The minimum deposit amount for beginners is often starts from 500 conventional units. Seriously? Isn't it a bit much for a first date?

A smart investor should always remember the rules of Risk Management and risk a minimum possible amount. Indeed, all brokers warn: trading in financial markets may entail a loss of invested funds. Therefore, it is important to make sure that you are really aware of all the possible risks associated with trading Forex instruments and CFDs. More often, brokers require a more modest initial deposit. It can be 100 dollars, and 500 is already above average. Such an amount, even with a stretch, cannot be considered small.

Part three. License and Registration


Let’s review a "conventional" forex broker, as an example. What do we see on this conventional broker's page? Location - United Kingdom, namely London. In addition, it also states that the activities of the company are regulated by the VFSC Financial Services Commission. And we know that in this country, to work in the financial market, a broker needs an FCA license. That is the first inconsistency. And if there had been a VFSC license, it would have been trustworthy for a penny, for such a diploma is issued by the island Pacific licensee Vanuatu. And you’ll have to bring claims also on the island? You should try to find at least some license on the site. And often the searches are unsuccessful - there is simply no license. Okay, let's check on the VFSC website, is there our "conventional" forex broker on the lists? Unfortunately no - not listed.

Part Four. Clones


It is interesting to check the broker for the presence or absence of so-called clones in order to conclude that the company’s intentions are pure. The structure of the clone forex broker’s site is often completely identical to the site of the "conventional" broker. Similar sections: main, about us, trade and investment, contacts - the order and content of the sections coincide. Even the text at the relevant pages is unchanged. Such brokers do not even bother to hire a copywriter and not just rewrite the text, but, at least, switch points. Only the pictures are changed so that the visuals did not suspect a trick. In general, it is the same “person”, but with a different photo. And the location can be different, for example: the city of New York, the United States of America. And still the lack of licenses.

And another interesting fact peeks out of the “basement” - the shy line “the information on this page is not intended for residents of the United States”. Why? Is an American broker not for Americans? What kind of discrimination? Continuous alarm bells.

Part Five. Customer Reviews


What do former relationship members write about a broker? Satisfied investors are rarely can be found, but the deceived customers show up in abundance. This is not surprising, by the way.

Part Six. User Traffic


To form a balanced opinion about a person, you need to study their social circle. To judge the integrity of a broker, you need to find out where its main traffic comes from and compare it with official data on registration and place of business. Using the website Alexa.com, you can find out quite interesting information. It turns out that the main visitors to the conventional forex broker live in Singapore, and not at all in the UK. In addition, more information about traffic sources is available, as indicated, only in paid applications. Everything is too confused, like hare tracks in the snow when it wants to confuse the pursuer. And one more interesting fact: SEO audit of the conventional broker’s site tells us that the main traffic is generated by directly typing the site address in the search engine. This happens with the most famous companies and brokers, but our conventional broker is not that famous, and this confirms doubts about its cleanliness.

Part Seven. Registration on the site


Try to perform a simple manipulation - registration on the site. Sometimes a broker requires a photo with a passport, where there is even a signature sample visible. One must not be a smart person to provide such information to the owners of the site where cookies are used.

Part Eight. User agreement


For a broker and investor, the usual thing is to sign a user agreement. But such an agreement is desirable to study in detail, it is permissible even to resort to legal advice. But in the situation with our “conventional broker”, there is no user agreement at all. There can be a section called the “Risk Disclosure Statement”. But this is a completely different section; the broker should have it anyway. And the main legal points should be spelled out precisely in the user agreement. In this case, due to its absence, by registering on the company’s website, you, therefore, agree to all the conditions of cooperation with it that it will offer, even post factum.

Conclusion


The site of a broker in general, or rather, its main pages, can be made quite professionally and look trustworthy. There can be a lot of information, everything can look attractive and inspire confidence. The given figures on the terms of trade for different categories of customers could be quite real. But all this can be the facade of the gingerbread house, so to speak, beautiful and alluring. But the fact that there are internal rooms of the castle of the evil witch.

Author: Kate Solano for Forex-Ratings.com
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