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How to Pick the Best Broker; Why Arincen

1: What is FOREX and Why Do We Need a Broker?

The FOREX market is a global decentralized marketplace for the trading of currencies. This market, which determines foreign exchange rates for every currency, includes all aspects of buying, selling and exchanging currencies at current or determined prices. In terms of trading volume and liquidity, the FOREX market is by far the largest in the world, at some six trillion dollars daily, only followed by the credit market. The FOREX market operates 24 hours a day and five days a week (Monday through Friday), except international holidays.

By trading FOREX online, users are able to make extra income on the side, a phenomenon that appears to be on the rise in recent years. Such activity is facilitated by a brokerage firm, which in turn enables clients to buy and sell through a trading platform, either on your personal computer (PC) or more recently by using one’s own smartphone.

In what follows, we list to those who know and those who don’t the most important terminology in FOREX trading. This includes:

 

  1. Spread, defined as the difference between the bid (sell) price and the ask (buy) price of a currency pair.
  2. Leverage, the borrowing of a certain amount of the money needed to invest in some currency deal.
  3. Lots, denoting the number of currency units you will buy or sell. 
  4. Pips, short for percentage in points, used to quote changes in FOREX currency pairs.

2: Trustworthiness

At the beginning, it is best to learn about regulatory bodies and their role in the FOREX market. Regulatory bodies are government entities or independent units vested with authority to oversee a certain sector and/or activity. They play two main roles:

  1. Observing and regulating the work environment in the FOREX market; and
  2. Protecting FOREX investors and their funds.

Every FOREX firm must at least obtain one license from a relevant regulatory authority. Companies that do not have such a license must be avoided at all times. All you have to do is to log into one of the regulatory authorities we will mention below and search for the company you wish to deal with. If your search yields a result, then the company is licensed and as such can be used. Of course, this is partly subject to you screening its past track record and business dealings, where and if applicable. Otherwise, if no results pop-up, it means the firm you are looking for is not licensed and should be avoided at all costs.    

In the following paragraphs, we will list the most formidable FOREX market regulatory bodies from around the world.

  • The Financial Conduct Authority (FCA), UK.
  • The Swiss Financial Market Supervisory Authority (FINMA).
  • The Australian Securities and Investments Commission (ASIC).
  • The Financial Markets Authority, New Zealand.
  • The National Futures Association (NFA), US.

While the world has many other FOREX market regulatory bodies, these are the most important five and also the strictest. To learn more about other regulatory bodies, please visit Arincen, where you will find a comprehensive global database.

Having ensured the integrity of the FOREX firm you would like to deal with, as per the second point listed above, and after confirming legal and licensing matters related to the company in question, you are most likely dealing with a legitimate firm. It is never unimportant to reiterate that due to concerns about the safety of deposits, FOREX traders should only open an account with a firm that is licensed by one of the aforementioned bodies. However, before you take the plunge, there are other issues you need to consider. These include online technical concerns related to the FOREX firm you are looking at, as will be discussed later on below.

3: The Dos and Donts of FOREX Brokerage Companies

The first step that one ought to check is the extent to which the FOREX company abides by the rules and regulations governing its operation and insofar what it can and cannot do. 7 things brokerage firms cannot do are:
  1. The FOREX brokerage firm cannot recommend a buy or sell.
  2. The FOREX brokerage firm must not provide price or market expectations.
  3. The FOREX firm cannot control your financial dealings (deposit/withdrawal).
  4. The FOREX brokerage firm should not “manage” your portfolio under any circumstance.
  5. The FOREX brokerage firm cannot grant a client a bonus unless there are clear terms guiding it from beforehand.
  6. The FOREX brokerage firm must not use bank accounts not under its name.
  7. FOREX brokerage firms cannot have or offer the service of account managers.
All that FOREX brokerage firms should do is to facilitate buyers and sellers to come together. As a deal is struck, the FOREX firm receives an agreed-upon commission. Therefore, if a FOREX brokerage firm violates any of the seven rules aforementioned, which if indeed is the case, indicates a lack of integrity on behalf of the company, clients must shy away from dealing with it. If you do, however, wish to receive any of the abovementioned services, our advice is to seek informed help from a company like Arincen, something we will explain more about towards the end of this article 4: Deposits and Withdrawals

When trading currencies, making deposits and withdrawals with licensed FOREX brokers should be simple and straightforward, and to hardly take up any of your time. Good FOREX brokers are constantly striving to offer traders even more deposit and withdrawal options, and to make the process even easier. In this regard, it is considered a great feat if the FOREX broker offers traders a credit card to enable them to withdraw their realized profits from an ATM wherever they may be.

Speed of execution in withdrawals and deposits is important, most notably in two cases:
  1. Speed of withdrawal and funds arrival should not take more than 2-5 business days. In our research here at Arincen, we registered and deposited in all of the FOREX companies under review. We did that to test for the speed of withdrawal, with companies that are successful in a quick turnaround getting high marks. Of course, our research took into account differences that may arise from being in a different country or region and/or different withdrawal methods.
  2. There should be an automatic integration between the customer’s portal (where he/she deposits and withdraws) on the one hand, and the trading platform on the other. This is especially important given how significant it is to allow traders to deposit quickly ahead of major market movements. An automated system also ensures speed of withdrawals without having to involve a human element.
Of course, it would be very hard to find any trader that would reject the benefits of having a credit card to facilitate and ease the withdrawal process. We, therefore, gave high marks to the companies that offered a credit card to their customers. Unsurprisingly, companies that offered different withdrawal and deposit options got a bonus point in our research, especially those that offered a multitude of options for deposits. Such options may include: