ASIC is indeed considered to be one of the most exigent national financial regulators in the world.
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This is indeed why it is doubly important to check with the regulator BEFORE you commit any money to a trading venture. In other words, in case of bankruptcy due to fraud, or mismanagement, the customers funds are safe.
FXCM's clients accept that they were liable to lose the capital they had contributed to their foreign exchange trading accounts. However, they argue that FXCM had a widely-advertised policy of "no negative or debit balances", and its poor risk management led to losses spiralling out of control.
One of the greatest concerns traders have about leverage is that a sizable loss could result in owing money to their broker. At FXCM, your maximum risk of loss is limited by the amount in your account.
All accounts are tracked by our "Margin Watcher" feature. With the Margin Watcher feature, if account equity falls below margin requirements, the FXCM Trading Station will trigger an order to close all open positions.
FXCM's aggrieved Australian clients argue that other brokers navigated the Swiss franc shock in much better shape than FXCM because they had better risk management practices in place, and their clients' accounts were closed out quickly before losses spiralled out of control. Dangers of leverage exposed Because currencies tend to move in small increments, foreign exchange traders use leverage, or borrowing, to accentuate their profits. However, with leverage comes the risk of greater losses when currencies move against the trader.
One must remember that trading is usually not a zero-sum game , and brokers primarily make commissions with increased trading volumes. Overall, it is in the best interest of brokers to have long-term clients who trade regularly and thus sustain capital or make a profit. The slippage issue can often be attributed to behavioral economics.
It is common practice for inexperienced traders to panic; they fear missing a move, so they hit their buy key; or they fear losing more and so they hit the sell key. In volatile exchange rate environments, the broker cannot ensure that an order will be executed at the desired price.
This results in sharp movements and slippage. The same is true for stop or limit orders. Some brokers guarantee stop and limit order fills, while others do not. Even in more transparent markets, slippage occurs, markets move and we don't always get the price we want. Learn about different forex trading strategies in " Place Forex Orders Properly. If a trader does not receive responses from their broker or the broker provides vague answers to a trader's questions, these are common red flags that a broker may not be looking out for the client's best interest.
Issues of this nature should be resolved and explained to the trader and the broker should also be helpful and display good customer relations. One of the most detrimental issues that may arise between a broker and a trader is the trader's inability to withdraw money from an account.
Conduct Broker Research to Protect Yourself Protecting yourself from unscrupulous brokers in the first place is ideal. The following steps should help: Do an online search for reviews of the broker.
A generic internet search can provide insights on whether negative comments could just be a disgruntled trader or something more serious. And if appropriate, gain a clearer understanding of the U. Make sure there are no complaints about not being able to withdraw funds. If there are, contact the user if possible and ask them about their experience. Read through all the fine print of the documents when opening an account.
Incentives to open account can often be used against the trader when attempting to withdraw funds. Reading the fine print will help make sure you understand all contingencies in these types of instances.
If you are satisfied with your research on a particular broker, open a mini account or an account with a small amount of capital. The authorities that regulate the institutions in your area will depend on your geographical location. The CFTC determines the rules regulating the commodity brokerage industry, and its stated mission to investors, trader and the public from unethical practices in the commodity and financial futures and options markets.
In addition, the CFTC is responsible with creating the regulatory environment that will foster a free market environment that fosters competition. The CFTC has the authority to close any unregulated entity in the retail forex industry. The NFA is another regulatory body that enforces adherence to certain capital requirements, and maintenance of a sound financial structure by its members. It also requires that member firms actively supervise their employees, agents and affiliates to prevent fraud and unlawful activities.
Since not all forex brokers are members of the NFA, it is important to seek those that offer the added transparency of membership, in order to minimize the risks associated with fraud and similar illegal acts.
All legitimate brokers providing retail forex services must be registered with this body which enforces capital requirements.
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This article looks at the different scams that can be found in the forex Australia trading market. The forex Australia market is so big and . Forex Regulation in Australia The Australian Securities and Investment Commission (ASIC) regulates forex trading in Australia. All legitimate brokers providing retail forex services must be registered with this body which enforces capital requirements.
Forex itself is a legitimate endeavor. You can engage in forex trading as a real business and make real profits, but you must treat it as such. Don't look at forex trading as a get-rich-overnight business, no matter what you may read in hyped-up forex trading guides. Is your forex broker a scam? Share. If you do an internet search on forex broker scams, the number of results is staggering. While the forex market is slowly becoming more regulated, there are.