Like other investment, you have to know the forex trading mechanism before you jump to this field. Another factor is legality. Just imagine, you already have real account and have hundred percent of profit. But the time you are going to realize your profit, you can not realize that because the broker company was running away. In fact, after researched, your broker is illegal. So what do you do know? You’ve loss anything. First thing you have to do is check the legality of Broker Company.

At newbie and they who jumped into this field, usually like platform served by broker company, or trading regulations which support the investor. But it will not enough if you pick your broker because of those two criteria.

1. Mechanism

Look at this mechanism diagram:

Like usual trading, in forex trading, it based on buyer and seller. But, the difference is, in this trading, we never meet our buyer or seller in physic, and there is no physically acceptance of the goods. All of those do it in agreement term and intermediately by arbitrage party, usually called broker. The broker duties is become retail transaction collector among the investor below it, and those transactions forwarded to the market.

2. Legality

 

Legality is main factor before you jump to investment area, especially if the investment portfolio include third party, as direct controller or just as mediator. But legality is something forgotten by new investor. They usually forget about the legality of broker company, because they were interesting in scheme that the broker offered.

Legality is crucial thing, man! An investing company usually play us fund collector, they have big opportunity to trick you, or maybe they have financial problem and do not pay you.

For that reason above, it necessary a regulator party from the government which have duty to watch and control an investing company like broker.

In USA, as pioneer in forex trading, they have regulator party, CFTC (Commodity Futures Trading Commission) and NFA (National Futures Association).

CFTC and NFA are role models for other regulator in each country in the world. The brokers under their regulation have to follow strict rules and strict selected. So, member of CFTC and NFA is so proudly to become member of these regulator bodies.

Forex trading grows and become international business and cross countries business, so CFTC and NFA accept broker from other countries.

My suggestion, put your money in legal broker if do not want your money burnt. There are a lot of illegal broker in the world. Don’t trust their nice platform. Ask their legality first before you ask another question.

As an illegal broker, they aim to deceive you. Illegal investing companies have a lot of trick to seduce you. Usually they use nice promises and add flavor in it so it seems rational. Some of their promises are:

Get gain until $1000 in a week

We offer you guarantee of investment profit until 30-40% a month

No matter the condition of the market, you always get profit

We promise to return each loss of your money

 

Well, is it too good to be true!!! Don’t trust them although they have great transactions history. Guess what, I also can make great transaction history like they had. Bring me a computer and Photoshop, with a little wipe, my transaction history magically change to always profit in higher value. We never know that the history is correct or not.

These are signs that you have to wary and consider before you spend your money to but an investment portfolio:

1. Make a suspicious attitude of investing scheme that too good to be true

The bad news is forex not a get rich quick scheme program. Forex is same as another investment portfolio. It needs your diligence, your patience, your working hard to success.

2. Avoid companies that promise huge profit for the money you had invested

3. Avoid companies that promises that there is no risk if you trade forex through their companies

It’s nonsense!! Any business that you do, there is always loss risk behind every business. Think this have you ever heard that there is business that no loss risk to do? I guarantee, every business have loss risk!!!! Like all of we going to day, it is a fate.

For you that always think no risky business, I tell you: DON’T DREAM IT!!! WAKE UP!!! If you want to success, you have to diligence, patience, and work hard. Work hard to determine investment policy, work hard to determine right timing, work hard to analyze fund and make risk management. Are those things do not necessary to consider?

4. Don’t do margin trading unless you know its mean

Margin trading is like magnifier. It uses to make the profit opportunity bigger, but it also make loss bigger. So, watch out!!! Once again, learn the risk before you start to invest.

5. Ask their claim that they trade through Interbank Market

Some of broker company claimed that they mediate their client transaction trough interbank market, so they get better price and do not necessary to bill administration and fee cost to their customer. In other way, you will not be charged a fee cost.

Interbank Market usually used by top bank to process their activity among banks in the world. Interbank Market do not involved small bank, moreover broker companies. So Broker companies do not have an access to go there.

6. Be careful for any payment processed via internet and do not involve bank transfer

Some of broker opened easily payment method though e-gold, paypal, and other payment method. It trusted, the payment method party is trusted, but you have to be careful about the beneficiary. After clicked, you usually aware where the money transferred or by what and who is the beneficiary. It’s too late to aware…

Remember that there are a lot of fake domains that seems like legal domains. Do not make typo, other wise you will visit illegal domain.

7. Usually, illegal broker make promotions in development countries and or specific ethnic

8. Make sure that you knew their track record.

In any word, track record is talking. It is a dedicated evident and working result of broker companies. So it will not trick you. If the brokers do not tell their track record, leave them and find other broker.

9. Find third opinion from their previous and existing investor.

It easy but also difficult too. Sometimes illegal broker men make positive campaign at independent to increase their positions. Once again, start think for too good to be true opinion. Don’t trust too positive comment. Filter the information.

10. Contact your investment advisor before you begin to invest.

If you still feel in doubt, contact the expert (your friend, your neighborhood, or professional that you can trust) that more understand about forex trading and ask some advice about broker companies.

 

Tags: forex, forex legality

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