There are a lot of traders who does not even know the difference between regulate and unregulated brokers. Most of the beginner traders are introduced to the forex market by someone they know or someone they have seen on social media. They blindly open accounts and they barely pay attention to what kind of a broker they are introduced to, in details. Brokers are just certain companies that still needs license and follow regulation rules. Some traders prefer regulated brokers some prefer unregulated brokers for some reasons that they see fit. It is also good to understand what you put yourself into before you even invest your capital with some broker companies.
Regulated brokers
· Regulation – Trading with regulated forex broker, you have utmost surety that your trades are protected by the law as per defined by the state. Regulatory bodies have already defined a set of laws and certain rules. These certain laws clearly define fairly trading at all times to prevent fraudulent activities.
· Safety of funds- However your broker goes broke or run out of funds, your funds are safe because they are bind by law that should anything happen, they do not use the investor‘s funds for any other purpose besides investing in the investor’s approved trades. Your investment will be completely safe.
· Fraud Protection – Regulatory bodies really protect you from fraudulent activities that can make you lose your hard earned money. These regulated brokers are bind by law to not perform any illegal movement on their clients because if they do so, they might face serious penalties or permanent ban.
· Risks involved- Whenever you get involved in any sort of legit investments, you must be told about the risks involved. Regulate brokers also helps you with knowledge for you to make more wiser trading decisions.
Unregulated brokers
· These kind of brokers are not bind by law since they have no regulatory bodies involved. In most cases they are a major risk to investors.
· Traders are not protected from the mistreatments and fraudulent activities when they choose unregulated broker.
· They offer high leverage some of them also high spread.
· There are a lot of these kind of brokers that has been operating like this for years, one of the reasons they bypass the regulatory bodies is because of high maintenance operational costs including obtaining a license.
· They might perform bad business activities for their clients and some engage in fraud as well.
There are legitimate businesses that are not regulated but they might be failing to obtain their license. There are unregulated brokers that have been operating for years and some are doing a good job with their clients, the question is how long？ The idea of using unregulated brokers might sound very interesting until something bad happens to you or anyone of that matter. A client can make more money compared to a client using a regulated broker. It is all up to a certain individual on how they want to approach their trading career, but with regulated brokers you become less stressed about losing your money in a way that you did not intend to as an investor. We have seen new broker coming in to the market with the hype in South Africa but most of them are not regulated. Download the wikifx app to know more about which brokers you may trust and get the reviews from other traders that have experienced the service of a certain broker that you might be looking for.
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