Forex is the largest financial market of the globe which is actively traded by investors, central banks, multinational corporations and individual traders. To compete in this large marketplace traders have to acquire optimal information and a reliable platform that would connect them with the live-market, and this is where forex trading platforms make their way.
So, what is the difference between regulated and unregulated Forex Platforms?
Meant for conducting trading activities, these platforms offer a wide range of services including analysis, chartists, Expert Advisors (EA), indicators and much more, allowing traders to earn maximum profits from every order.
Every platform is not the same; they differ in terms of their regulation, trading platforms and terms of service. Now, the opinion of traders regarding unregulated platforms varies greatly, as there are many who are extremely strict about the regulated jurisdictions of the broker while there are others who think its fine to choose unregulated entities. The thought that arises here is- which one to select, and what is the difference between them?
Security: Regulated Vs. Unregulated Platforms
Regulation not only adds to the credibility of the broker but at the same time it secures the funds of traders. Some of the common examples of regulatory bodies include CySEC (Cyprus Securities & Exchange Commission), Financial Conduct Authority (FCA) UK and Market in Financial Instrument Directive (MiFID) EU. In order to be accredited by these frameworks the platforms need to abide by stipulated terms and conditions such as capital requirements, area of operation, leverage limit and security of asset.
However, the same cannot be expected in case of unregulated brokers because they lack the measures that can protect traders from mistreatment of fraud. For example, the platforms that are licensed by MiFID tend to pay compensation funds so that traders can recover at least a small percentage of their loss.
Risk Management; Regulated Vs. Unregulated Platforms.
Another major advantage of regulated brokers is that it provides a peace of mind because no matter what happens, the broker will have sufficient capital to the client even when its business goes bankrupt. Moreover, such platforms are subjected to frequent audits which examine whether they are operating the way they should or not.
On the contrary, unregulated Forex brokers are not bound to any restrictions and this indeed affects the safety of your funds. Though it doesn’t mean that if the broker is not licensed then it is not following the industry standards, but the point is there is no relevant organization which is verifying it.
Hence, the key differences between regulated and unregulated Forex broker lies in security and quality control. This is the reason why one needs to think a million times before trading with unregulated platforms.