HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
XM information and reviews
XM
86%
NordFX information and reviews
NordFX
86%

Banking Forex: advantages and disadvantages


Without exaggeration, currency pairs can be called the most popular financial instrument. The instability of the exchange rate, combined with the high threshold of credit leverage offered by brokers, creates favorable conditions for making a profit. If you compare currency pair trading with stock market assets, the advantages are obvious:

It is not superfluous to pay attention to the fact that the daily turnover of the decentralized Forex market exceeds 5 billion US dollars. Significant by the level of capitalization industries have always attracted the attention of not only investors and ordinary people but also scammers. Thousands of dubious brokerage companies are ready to offer their services to inexperienced traders uniquely for the purpose of personal enrichment.

Many beginners, who collided with representatives of such organizations, stop trading on financial markets forever. For the same reason, some traders prefer to trade exclusively through banks, but how is justified this? After all, cooperation with such organizations conceals with a number of negative features that might have a significant influence on the financial result.

In this article we will talk in detail about the advantages and disadvantages of Forex trading through a Bank which will allow everyone to make an informed decision about the feasibility of cooperation with these formations.

Security of Forex trading via a Bank


Speaking about the safety and security of funds during trading on Forex through a Bank you should pay attention to a number of features:

Advantages

Disadvantages

Transparent business model

Commission is charged for each trading operation including withdrawals of funds

Market spreads

 

Guarantees of fund`s safety

 

The terms of the client regulations do not allow the broker to dispose of the client's funds without their knowledge, as well as to block the trading account without prior notice and for good reason

 

Trading conditions


The conditions offered by banks for trading in a decentralized currency market differ in many ways from those that offshore companies are ready to provide. This can be explained by stricter regulation of commercial activities, but in return, users can expect to avoid non-trading risks. Let's analyze each aspect of trading conditions separately.

Opening a trading account


In most cases, opening a trading account with a Bank is only possible if you personally visit the office to sign the relevant documents, make an initial Deposit and verify it. If, for a number of reasons, personal presence in the Bank is not possible then confirmation of the potential client's identity is made via video link with a representative of the organization, and the necessary documents for opening an account will be sent to your email address. You will need to print them out, fill them out by hand and upload scans. It is also worth to say that some banks may require sending documents by registered mail.

In cooperation with offshore brokers it is possible to open a trading account and pass verification online. Registration and uploading of identity documents will not take more than 5 minutes. Then you will need to wait for the company's representative to check the documents (up to 2 business days), choose a convenient way to add funds to your account from the suggested ones, make a transaction and start trading.

Starting deposit and credit leverage


It is not difficult to start trading on a decentralized currency market in cooperation with offshore organizations. Often this may not even require a starting deposit. Such organizations periodically have a contest for traders on demo accounts with a formed real prize fund. If you manage to win a prize, in accordance with the terms of the competition, the profit will be credited to the trading account. After that you can use it in your work or output it using one of the available methods. In addition, a row of offshore companies often offer to potential clients welcome no deposit bonuses so,thanks to it, you can start working on Forex without investing personal funds. These are all small sums but this money is quite enough to assess the quality of processing trade orders.

The situation is more severe when working with banks. For example, for trading through the platforms of Swiss banks (Dukascopy Bank SA and Swissquote Bank SA) it is enough to Deposit 1000 USD or EUR what depends on the base currency of the account issued during registration. But for cooperation with Saxo Bank the trading account will need to be replenished in the amount of 10,000 USD. By the way, as for the reliability of the company and the question of the safety of funds, brokers from the United States (Nadex, InteractiveBrokers) are not inferior to banks. This is due to the rather strict measures of legislative regulation. Control over the activities of Forex brokers in the United States is carried out by the CFTC, NFA.

Attention! In accordance with regulatory requirements, the credit leverage for Forex trading via a Bank is 1:30 (MiFID directive) and not higher than 1:100 (FINMA requirements, which regulates the activities of Swiss banks).

As a comparison, during working with offshore Forex brokers the level of financial support is almost unlimited but it is difficult to call it an unambiguous advantage. After all, the higher credit leverage is, the higher the risk for each transaction is also. This is the reason for the limitations of regulatory structures.

Commissions and spreads


Commissions for processing trade orders are charged by both offshore intermediary organizations and banks. However, in the first case, such costs are integrated into the spread (the difference between the purchase/sale prices). During cooperation with banks commission costs are in a separate column in the terminal. On average, such trading expenses are identical which is not true for withdrawal fees, but we will talk about this later.

Attention! In accordance with the requirements of regulatory structures, banks providing the intermediary services in financial markets are required to withdraw all customer transactions to the interbank market. This ensures that traders receive market spreads (from 0 points on liquid currency pairs) and quotes, and also eliminates conflicts of interest.

The Deposit and withdrawal of funds


At the conclusion of the brokerage contract, the Bank Manager will suggest to issue a debit card for quick transfer of funds from the trading balance to the main account. It`s worth to refuse this offer because in this case there are no Commission costs for withdrawing funds. If the base currency of the trading account is USD or EUR, the conversion will be performed automatically at the exchange rate of the Central Bank. You should also pay attention to the limited ways to Deposit funds: through the cashier of the parent Bank or partner Bank, or through other services of the Bank.

Methods of depositing / withdrawing of funds with the cooperation with offshore brokers are provided for a variety of ways:

Attention! Regardless of the type of intermediary organization, practice shows that funds are credited to the trading account within 1 minute after the confirming of transaction. It will take no more than 1 business day to withdraw the profit in cooperation with banks. The funds will be credited to your debit card. By Forex trading through offshore companies, the trader will need to fill out their own tax returns to avoid trouble with the tax service. Moreover, it may take up to 5 business days to withdraw funds to a Bank card in this case. Funds are transferred to the balance of e-wallets more quickly then described above, after which they will in any case need to be withdrawn to a Bank card which is associated with additional Commission costs.

The technology of execution of orders


There is a widespread opinion on the Internet that banks use unique trading platforms and technologies for processing trade orders. Such information is outdated. Today almost all intermediary services provide clients with the opportunity to work with the usual MetaTrader terminals. As for the order execution technology, all trading orders are processed using NDD or ECN in accordance with the requirements of regulators, which implies direct withdrawal of transactions to the interbank market with no direct intervention of the broker in the flow of quotes. Thus, in this aspect, banks are not inferior to their offshore counterparts.

Conclusions: who is suitable for Bank Forex?


Based on the facts presented in this article, we can say with confidence that Forex trading through a Bank is primarily suitable for novice traders. There are a number of reasons for this:

The last point of advantages of Bank Forex deserves special attention. In fact, difficulties with identity verification often become an obstacle to withdrawing funds in cooperation with offshore organizations.

Despite on the mentioned advantages of Bank Forex, trading conditions of offshore brokers should not be ignored. Because of almost unlimited financial support, welcome bonuses and tournaments for traders will allow you to realize your full trading potential even without the need to top up your account. Cooperation with such organizations is more suitable for supporters of aggressive trading, as well as for traders who prefer to work with contracts for difference. It is important to note that Forex banks do not provide the opportunity to work with CFDs and other derivative financial instruments (with rare exceptions). In this case, only operations with currency pairs are available for earning.

Author: Kira Ostrovskaya for forex-ratings.com

RELATED

What's best: Forex robots or trading strategies?

Regular winners of Grand Capital contests sometimes honestly admit to the use of Forex robots. Meanwhile, many participants use contests to test their trading strategies...

What is Decentralized Finance, or DeFi?

Decentralized finance, or DeFi, is similar to but not identical to Bitcoin (BTC). The term "DeFi" refers to financial systems enabled by decentralized blockchain technology. DeFi is mostly linked to the Ethereum (ETH) blockchain...

Which Cryptocurrency can you realistically trade online?

The financial crisis led to the worldwide distrust in the financial system. To help solve this problem, an anonymous person...

Designing Forex Trading Plans and Rules

Just about every consistently profitable...

NFP's Effect on Gold Prices

While the relationship between gold and NFP is not clearly defined, in the short term, it could serve as an indicator and a trading opportunity. Being one of the most...

Everything you Wanted to Know about Dogecoin

Sometimes, the best things in life start as a joke, and Dogecoin is not an exception. Initially created as a joke in December 2013, based on the popular Doge meme of a Shiba Inu dog...

A Deep Dive into Long and Short Positions: Empowering the Modern Investor

In the ever-fluctuating world of trading, a multifaceted comprehension of long and short positions stands paramount. This profound understanding enables investors...

Is EOS A Good Investment? Top Altcoin Insights For 2021

The cryptocurrency market is filled with innovation and ambition, where projects aim not just to be platforms for developers to build on, but full-scale ecosystems that can...

An Advanced Guide To Day Trading Crypto

With cryptocurrencies all over the news and making headlines in mainstream media for bringing early investors enormous gains, everyone wants a piece of the action...

Ultimate guide to Dogecoin trading

Dogecoin is a highly popular "meme coin" that has even attracted the likes of Elon Musk to become a fan. Dogecoin is a cryptocurrency that was created in 2013 as a joke...

Chainlink: Is It on Track for a Bull Rally?

If you have recently watched the crypto charts, you can see the growing popularity of many coins, including Chainlink (LINK). And while so many assets are on the bull run...

Trading forex, stocks, and crypto during a downturn

As 2023 gets into full swing, stock market volatility is heating up and showing a teaser of what’s coming—despite recession fears continuing to dominate headlines...

What Is A Crypto Airdrop And How Does It Work?

You might have heard about crypto token airdrops as a popular way to get free cryptocurrency with little to no effort involved. In most cases, the offer of something free...

Deciphering Crypto Lending: A Comprehensive Guide to the Process and Pros & Cons

While many cryptocurrency enthusiasts aim to profit from buying, holding, and selling digital assets, a growing number of individuals are discovering an alternative path to leverage their crypto holdings...

VeChain: Is It on the Verge of Massive Growth?

Asia continues to be at the forefront of blockchain development, and VeChain is one of the brightest crypto projects in the region. There are different opinions...

How to Make the Most of the Crypto Drop with Shorting?

The crypto market undergoes a clear negative trend that is expected to last for a while. Bitcoin has plummeted by 33% this week and reached the 18-month low...

Oscillating Indicators - Slow Stochastic

The slow stochastic is an oscillating indicator. Developed by George Lane , it can alert you to a shift of investor sentiment from bullish to bearish or vice versa...

All About Cardano: A Crash Course

Cardano has been one of the best attempts to solve two problems that BTC fails to achieve: scalability and network scalability. But are good intentions...

APR vs. APY in Crypto: A Comprehensive Guide

Cryptocurrency investments have become increasingly popular in recent years, attracting investors from all walks of life. As the crypto market continues to grow and evolve...

How To Store Bitcoin Safely: Crypto Wallets Explained

Bitcoin is booming once again, and everyone is rushing to learn all they can about the leading cryptocurrency by market cap. One of the biggest challenges Bitcoin and crypto investors face...

Vantage information and reviews
Vantage
85%
FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.