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Forex brokers and protection from them
08-01-2018 | No Views : 445
Despite the many advantages of working in the foreign exchange market, Forex brokers are spread over their ability to operate without being subject to a regulatory body, and often target these novice traders in many ways.
Including the temptation of the novice trader to achieve high profits in a little time, which causes him to enter a very high leverage and therefore high risk, which causes the loss of capital fully in favor of the company and this is a legal method for the placement of new customers as we will discuss below the types of companies.
Before we talk about forex brokers, let's get to know the types of forex companies. There are companies that profit from the loss of the trader and vice versa. The profit of the trader is a loss for the company, but there are also companies of this kind that do not work against the client and only profit from the difference in prices.
The types of forex companies and the type of forex brokersThere are three types of Forex companies and each one of them a way in the implementation of transactions of the client, and the latter type, although it is useful for small account holders, but most of the Forex companies and the mechanism belongs to the mechanism so be careful when dealing with a broker follow this type and verify his reputation before starting to open Calculate it.
STP - Straight Through ProcessingThese types of forex companies are reliable types that do not resort to the mechanism of Forex brokers, and companies of this type have good licenses to protect customer funds.
In this type, the company passes the trading order through the bank or a larger broker covering the matter without the company covered, so there is no conflict between the interest of the company and the interests of the trader.
The profit basis is the difference in price. For example, if the performing bank puts the trading order at half a point, the company sets another half point, but for the commission It varies from one company to another and not all STP companies take a currency to execute transactions.
It is worth noting that dealing with STP companies is good, as there is no conflict between the interest of the client and the company's interest.
ECN - Electronic Communications NetworkThis is the best type of Forex company, as the company connects the trader to the main trading network, which enables the client to access the best available price of the total amount, other than the type STP mentioned above, which provides the trader at the price of one bank.
The cost of trading in ECN-type forex companies is low. The cost of opening a transaction is in the price difference that the liquidity provider receives, plus the commission determined by the company, but at worst the total commission of the company and the difference in price is much lower than the price difference Obtained by the broker who follows the STP or the market maker.
The execution of transactions is quick because of the client's connection to more than one liquidity provider. This type of companies follows strict licenses. Supervisory bodies control the insurance of the traders' money. Therefore, the forex companies are moving away from this kind of companies. And the interest of the client, but the opposite of the adoption of this type of companies on the commission makes the interest of the company of the interest of the client, as the longer the client in circulation means there are more commissions for the company.
Despite the advantages of ECN companies, they are often not suitable for beginners and small account holders, as the minimum deposit in these companies is high.
Trading Desk CompaniesThis type of companies belongs to the majority of Forex brokers, as it does not execute trading orders in the market, but passes the transactions between the clients of the company or is the other party of the process meaning when the trader executed a sale order and there is no other client buyer buys the company, Which makes the existence of a conflict between the interest of the company and the interest of the client in many cases.
As this type of companies does not pass the deal in the market, but creates a parallel market called the market maker, and target this type of start-up companies that are more likely to lose.
But this does not mean that all companies belonging to the category of market makers are bad. There are many good companies of this type and are subject to licenses and regulatory bodies. They depend on the fact that the percentage of losers in Forex is higher than the percentage of winners. .
This type of company is suitable for the novice trader as it provides the possibility of opening a trading account with very little deposit, but it is prudent to choose the company that works with it strongly because of the spread of Forex companies, the umbrella belonging to the quality of the companies market maker.
Dear reader, so we have finished clarifying the difference between the types of Forex companies and suitable for novice traders and owners of small capital, below we will talk about some steps to protect from Forex brokers.
Steps to protect against Forex brokersSince Forex companies are basically based on attracting inexperienced new traders, if you are a newbie do not choose the company you will work with on your own, you can consult a friend who has a lot of experience in Forex. You can also contact us to nominate the right company for you.
In this lesson we will explain some of the steps that prevent you from dealing with Forex brokers, and by applying them will be able to choose the right company.
- First, you should look well for company ratings by searching online if you do not have sufficient relationships in the field to provide you with sufficient information.
- It is also important to look at the licenses of the company and its regulatory bodies, as the regulatory bodies protect investors from manipulation of companies, and therefore the Forex companies will keep away from regulatory bodies to be able to manipulate the money of clients freely, so licenses are important for the company that will deal with them.
- You can use a reputable broker to be an intermediary between you and a Forex company. If a reputable agent does not risk the reputation of his or her website and deals with Forex brokers.
- After following the steps above, deposit a portion of the amount you want to invest and do not deposit the entire amount once, you may find things you do not like about financial transactions.
- In addition, there is a supervisory body that requires the Forex company to deposit the money of the customers in bank accounts separate from the company's account, in order to ensure that the company does not use the client's money except in the trading process, and to protect the customers' money in case of bankruptcy.
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