In light of recent events, I have decided to expand the listings on the broker page. There’s really only a handful of veteran brokers traders should choose instead of flocking to the newer sites popping up rapidly.
Speaking of the recent events, what are they?
This shouldn’t come as a surprise given FXCM’s history of poor business practices. Back in 2014, they were investigated and fined for asymmetrical slippage where they kept positive slippages and passed negative slippages to clients. Being one of the biggest Forex brokers in the United States and world, blaming this practice on “technology” is not an acceptable response.
Supposedly one of the bigger Forex brokers, traders have been experiencing withdrawal issues with IronFX. Traders have turned violent including raiding the Shanghai office to do whatever is necessary to get their money back.
Given these recent incidents, I have decided to broaden the scope of the brokers page to list just a handful of brokers that remain reputable over the years. To gain a better understanding of how these brokers make the list, there will be a list of criteria I use to determine this.
1. Years of operation
Although we shouldn’t solely pick brokers based on how long they have been operating. Take a look at FXCM. Since operating in 1999, they have been screwing traders ever since with asymmetrical slippage being the most notable. However, brokers that last typically must do something right. In choosing a broker, we skip the brokers that have popped up over the past one or two years just because they have no track record.
2. Swiss National Bank unpeg
When the Swiss National Bank unpegged the Franc, it sent shockwaves throughout the market. Basing primarily on the responses provided by Forex Crunch, we take a look at the brokers and analyze how well they are able to maintain their capital reserves. While majority of the brokers remained relatively un-affected or faced with non-substantial losses, there were brokers who couldn’t handle the heat. Excel Markets founded in New Zealand has shut down unable to meet losses and Alpari faced insolvency concerns. By looking at this event specifically, we can take a look at which brokers were able to handle stress on their capital.
The IronFX fiasco reveals that not all regulatory organizations are built equally. Finance Magnates quoted CySec stating it had no restitution powers over the matter. If they have no restitution powers, shelling out $200,000 fines do next to nothing to hurt a firm that has $176 million in traders’ money in their accounts. Regulation wise, brokers selected will have to fall under CFTC, NFA, FCA, or ASIC.
4. Deposit bonuses and promotions
Brokers offering deposit bonuses will most likely not be considered. These brokers typically only require a minimum of $100 in order to get a reward of an $100 bonus. Brokers do not expect you to profit in the long term and will carry stringent withdrawal conditions. I will focus on brokers that consistently provide and improve its core services over overwhelming promotions.
5. Complexity of account types
Some brokers will differentiate account types by deposit requirements, platforms, or some other method. Generally speaking, brokers that offer ever complex differentiation of account types will be considered , but most likely won’t be included in my list. In one sense, this is the concept of price discrimination. Usually “advanced” or “pro” accounts will carry higher minimum deposits in exchange for a narrower spread or access to additional features that probably don’t even cost much to implement.
6. Payment providers
There are quite a few brokers based in Cyprus and BVI that rely heavily in online payment processors. These brokers fail to provide actual bank wire details. Although this might not mean much, but it does raise the concern that the broker might be a pump and dump scheme getting away with whatever funds are deposited.
These will be the six main categories broker selections will be based on in determining which ones should be featured and which ones should be avoided. Over the next few weeks, pay close attention to the brokers page as more will be slowly added.