Home Finance Why Do We Need to Use A Regulated Forex Broker?

Why Do We Need to Use A Regulated Forex Broker?

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By “Forex market regulation,” we mean the set of regulations and legislation that all Forex market participants must adhere to. The goal of rules and laws is to safeguard consumers from deceptive activities, fraud, and hidden dangers in the financial markets.

Selecting a trustworthy forex broker may mean the difference between trading success and financial ruin. Your initial decision should be whether to work with a forex broker who is regulated in your country or with an offshore “unregulated” broker.

Difference between Regulated & Unregulated Forex Broker

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Brokers in the forex market are typically split into two camps: those that are regulated and those that are not.

To the average trader, a regulated forex broker is one that operates out of a country like the United States, the United Kingdom, or another that has a robust regulatory framework for the financial services business. For instance, the CFTC (Commodity Futures Trading Commission) and the NFA (National Futures Association) each have jurisdiction over Forex firms based in the United States (National Futures Association).

Unregulated forex broker refers to companies that are headquartered in offshore locations where there are fewer regulations in place to oversee the broker’s business. These offshore brokers are technically still regulated, but usually only in the most slack sense possible.

Why should you pick up a regulated forex broker?

Here are some of the most compelling reasons why you should work with a regulated forex broker:

1. Safe Deposit

The most important benefit of using a regulated forex broker is peace of mind. Foreign exchange (Forex) trading is rife with peril; not even the most reputable broker can fully insulate you from market volatility. Nonetheless, increased regulation of forex brokers safeguards investors from the likes of broker misconduct, scams, loss of deposit, and insolvency.

Your funds are safe and secure in the hands of a regulated broker until you decide to trade them. Brokers who are subject to government oversight must also keep meticulous, audited records of client deposits and withdrawals. This significantly increases the difficulty of making deposits simply “disappear.”

2. Avoiding Scammers

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If you want to discover a trustworthy forex broker, you can look to the NFA or the Financial Conduct Authority for help. There are databases available to check to see if your broker is licensed and if there have been any complaints lodged against them.

If you are out of the reach of the authorities, you are much more likely to be the victim of fraud. To the untrained eye, it would be easy to create websites that mimic legitimate online trading platforms. Furthermore, it can be challenging to determine which unregulated forex brokers are legitimate and which are not because new ones appear to sprout up every day.

3. Transparency

Trading fees should be a major factor in your decision for a broker. All fees linked with your account, including transaction fees, must be disclosed by your broker. It can be difficult to estimate how much you will spend each trade with some offshore brokerages due to their reputation for charging a variety of hidden fees.

Accountability is also enhanced by transparency. While working with a licensed broker, you won’t have to wonder who owns or has an interest in the business. There are actual people involved, and their identities and good names are at stake.

4. Customer Support

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When choosing a regulated forex broker, customer support is another critical factor to consider. A forex broker who provides excellent customer support can make all the difference in your trading experience. This is because the forex market is active 24 hours a day, five days a week. Therefore, traders may need assistance at any time of day or night.

In the event of a technical issue or a question regarding a trade, traders want to be able to reach their broker quickly and efficiently. That is why it is crucial to choose a forex broker that offers excellent customer support. Ideally, the broker should offer several ways to get in touch with them, including email, phone, and live chat.

Furthermore, the broker’s customer support should be responsive and helpful. Traders should expect prompt responses to their queries and a willingness to resolve any issues that may arise. The customer support team should be knowledgeable about the forex market and the broker’s trading platform.

One way to determine the quality of a broker’s customer support is to check their online reviews. Traders can read reviews from other traders to learn about their experiences with the broker’s customer support. If the broker has a history of poor customer support, it may be a red flag, and traders should consider looking for another broker.

Regulated forex brokers often have a better reputation for customer support than unregulated brokers. This is because they are subject to government oversight and must adhere to strict regulations. Regulated brokers must meet certain standards to maintain their license, including providing quality customer support.

Traders should also consider the broker’s language support. If the broker operates in multiple countries, they should offer customer support in various languages. This is especially important for traders who do not speak the broker’s primary language. A forex broker that offers customer support in a trader’s native language can make it easier to communicate and resolve any issues.

5. Risk Disclosure

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A legitimate forex broker will provide traders with documentation and risk warnings. They also provide a lot more information on several financial instruments. You won’t receive any such information from an offshore broker. Although they may provide some information on the dangers of the forex market, this information is likely to be quite general and so easily disregarded.

Regulated brokers simplify your life if you’re serious about risk management and want to make smart choices in your preferred financial market.

Let’s get one thing straight though. Even while a broker may have regulatory backing, that doesn’t necessarily make them trustworthy. Forex brokers operating in highly regulated markets are less likely to engage in fraudulent practices.

You are the most crucial part of your forex or online trading, therefore work on honing your trading skills, keeping your mind open to new information, and regularly summarizing your trading failures.


In conclusion, the importance of using a regulated forex broker cannot be overstated. The forex market is rife with risks, and traders must take steps to protect themselves. Working with a regulated forex broker provides peace of mind, as the broker is held accountable by government oversight and must adhere to strict regulations. The safety of deposits is a critical benefit, as is the ability to avoid scammers and fraudsters. Transparency is also enhanced, as traders can easily understand the fees associated with their account and have access to information about the people involved in the brokerage business.

It is important to note that while regulation is a necessary factor, it does not necessarily guarantee trustworthiness. Traders must always take steps to hone their trading skills and stay informed about market developments to ensure their success.

In the end, the decision to work with a regulated forex broker is a personal one, but the benefits cannot be ignored. By selecting a trustworthy forex broker who is subject to government oversight and adheres to strict regulations, traders can protect themselves from financial ruin and make smart choices in the financial markets.