How to choose a reliable forex broker
Against the background of a large number of forex brokers operating in the market today, the user is faced with an extraordinary task - to classify brokers in order to choose a reliable service provider and not become a victim of fraud. In this article we describe the important factors that are worth paying attention with the appropriate choice.
There are a lot of opportunities to get into the FOREX market today; both currency brokers and separate dealing centers are available to clients. A large number of additional services and bonuses are offered in order to attract a client: at the start they give additional funds or increase their leverage, the fee for transferring the transaction through the night, etc. is reset. At the same time, a large number of negative user stories arise: obstruction of the withdrawal of profits, transmission of inadequate prices to the client, hidden commissions.
Despite the fact that most brokers do their business without deceiving a client, there is a generally widespread opinion about large-scale fraud in the FOREX industry. The main question is where the money that the company, in theory, spends on bonuses to customers comes from. The simplest calculation shows that if this money is actually transferred to customer accounts, the company must have an unrealistic reserve of working capital. Let a thousand customers have contributed $ 1,000, each company has even donated 20% each (and there are a lot of offers on the market with a large percentage). Then the company gave them 200K, and return them at a commission of 0.01% and 10 transactions from one client per day, it will be almost a year. And it provided that the client did not leave earlier. In practice, these tools simply do not exist. The broker simply gives the client more leverage and in every way prevents the withdrawal of funds until the client has brought a profit that exceeds the original “gift”.
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Another dubious point of trade is the lack of withdrawal of transactions on the real interbank market. In fact, there is no exchange - people trade values ​​of a random process against each other. In general, given the fact that the size of a client transaction is much smaller than the size of real interbank transactions, this situation may be acceptable, but only if there is full confidence in the truth of the price values ​​transmitted. And DC has a big temptation to edit quotes to ruin their customers. The main method of adjustment in this case is the generation of “hairpins”, similar to the already well-known ejection in the region of 62% on the voting schedule for United Russia at the last Duma elections. By generating similar market "events", the broker takes back the "money" that he allegedly "donated" to customers.
One of the most adequate ways to protect yourself from brokers whose goal is to deliberately ruin a client is to choose an STP (NDD) broker. STP stands for Straight Through Processing, and the abbreviation NDD stands for Non-Dealing Desk. These terms mean pass-through of customer applications. In this case, the broker acts as a kind of "proxy server" between the client and the market. The broker earns only on commission from the client’s turnover. Accordingly, it is beneficial for a broker to earn a client - in this case he will continue to actively trade and increase turnover, thus increasing the commission. Mostly in this format, brokers operate in regulated markets around the world and in Russia, and the most reputable brokers on FOREX also work. Among the pure STP brokers in Russia you can list OBR Forex, Yadix, Accentforex.
B-Book is the name of the technology in which the majority of customer transactions are balanced within the company. This is extremely beneficial to the broker, because instead of the commission, which is about $ 40 from a million, the broker puts $ 150 in the pocket of the difference between the purchase and sale prices. Capital, as you know, goes to any crime for the sake of 300% of the profits, and here the relative difference is even greater. In this case, there is a risk associated with the total directional position of customers - it does not happen that exactly N / 2 customers bought and N / 2 customers sold. The properties of the Wiener process allow us to estimate the deviation of the total position in sqrt (N) * K, where K is the average client rate and N is the number of open transactions. It should be noted that the more clients, the more temptation for a broker to use the B-Book scheme, because the relative value of the value of its risks decreases with an increase in the number of clients.
Brokers can protect themselves from the risk associated with a directional aggregate position in various ways. The simplest of these is the coverage of the market. It turns out that the broker earns 40 dollars instead of 190 dollars from a part of clients, but at the same time he is absolutely neutral to the market. If the broker is satisfied with this profitability and he values ​​his reputation, the use of the B-Book scheme does not prevent the clients from working adequately.
However, connection to the market and accurate execution of transactions on it also bring additional costs to the broker, in connection with which many unscrupulous companies make a further step towards B-Book. For such companies, open deals are essentially the company's position against its own clients. A company that has, in comparison with the players, a much larger monetary resource and patience, is able to outsource long losses and close deals in profit noticeably more efficiently. In addition, in such a situation, even a small “twisting” of quotes brings much greater benefit to the company - in this situation, the company does not try to take the full amount of its rate from one client, but instead takes a little, but from all of its clients.
Also, with the B-Book scheme, companies can classify clients for whom the probability of loss is higher than for the rest - clients who commit a large number of transactions, overly gambling with leverage and so on. Such clients of the company are often deceived from the very beginning - the clients actually trade on a demo account, and the company immediately takes away their funds. Since the expectation is negative in making random transactions - sooner or later the client goes bankrupt, while often having no complaints about the broker. Actually, this approach provokes the emergence of unexpectedly bold advertising campaigns and actions, which are obviously unprofitable for an honestly working broker. In fact, companies are turning into a pyramid - the money of newly arrived clients goes to advertising and payments to those old clients who are lucky and whom the consultants could not persuade them to continue trading.
Brokers who value their reputation and fulfill the requirements of regulators are often limited in the way they work with payments. First of all, this is due to the pressure of regulators on banks, in connection with which banks are reluctant to work with brokers and try to limit the number of ways to transfer funds to a brokerage account. Bank transfer is the safest way to transfer money, if a broker insists on this method, it means that he is most likely not a one-day company and is set up for honest long-term work. But a large number of ways of receiving funds, including through the "gray" payment systems, as well as the lack of requirements for confirmation of identity - this is a wake-up call for the client. In this case, most likely, the requirements for the provision of documents will arise in the process of withdrawing funds. The number of pieces of paper, the scans of which the broker will ask to submit for "reliability" may exceed all reasonable limits, and in this case, many clients will refuse from their earnings in order not to suffer from the documents and beyond.
For an honest STP broker, this way of advertising is almost impossible to distribute bonuses to customers. The only thing that can offer such a broker - to give the client a portion of their own profits. One way to do this is to use an affiliate program. If a partner receives a smaller part of the commission from each client transaction than it would go to attracting a client “from the street” with advertising, such a partnership is beneficial to all parties (except for websites hosting advertising banners). Most brokers are willing to go for such a scheme, because it is profitable and encourages partners to attract new customers to the company. For private clients, the broker can offer a cashback - a transparent loyalty program, when a part of the commission is returned to the client. This scheme is also beneficial for all parties - the client receives more favorable conditions for bidding, but the company does not remain at a loss, since due to the large number of client transactions, it still gets its profit.
Oddly enough, many forex brokers , including absolutely conscientious organizations, do not have licenses to operate in financial markets. They do not need this trite in terms of the relevant jurisdictions. Many brokers are registered in jurisdictions that do not require (or did not require earlier) high reliability and do not impose capital requirements. Today, you can focus on brokers under the patronage of serious organizations such as SEC or ESMA (or their subsidiaries).
At the same time, it should be noted that after the events connected with the unbinding of the Swiss franc from the euro, many even regulated by DC turned out to be actual bankrupts. Plus, possible litigation will take place at the place of registration of the company, which makes this process almost hopeless. Therefore, when choosing a broker, first of all it’s worth looking not at the presence of a license issued by the regulator, but at the absence of negative reviews. Reputation is built over the years and collapses instantly, so good brokers value it and try to satisfy all their clients.
1. The most reliable are STP brokers, their financial result is positively correlated with the result of the client, it is simply unprofitable for them to cheat people.
2. Bonuses for depositing and opening an account is an alarming sign. An honest broker can only share already earned in the form of a cashback or affiliate program.
3. Serious requirements for crediting funds and the use of the most secure and reliable methods of payment - distinguishes honest companies from ephemeral.
4. The official license, especially from the island nation, which can fit entirely inside the Kremlin is not the most reliable sign. It is better to look at customer reviews, adequacy of support, ease of withdrawal.
On the Internet there is a lot of information about the choice of forex broker , so you always think how “unbiased” is the assessment of the author of an article. We, in turn, will try to give you the maximum of useful information that will help you in your future work in the forex market.
There are a lot of opportunities to get into the FOREX market today; both currency brokers and separate dealing centers are available to clients. A large number of additional services and bonuses are offered in order to attract a client: at the start they give additional funds or increase their leverage, the fee for transferring the transaction through the night, etc. is reset. At the same time, a large number of negative user stories arise: obstruction of the withdrawal of profits, transmission of inadequate prices to the client, hidden commissions.
Despite the fact that most brokers do their business without deceiving a client, there is a generally widespread opinion about large-scale fraud in the FOREX industry. The main question is where the money that the company, in theory, spends on bonuses to customers comes from. The simplest calculation shows that if this money is actually transferred to customer accounts, the company must have an unrealistic reserve of working capital. Let a thousand customers have contributed $ 1,000, each company has even donated 20% each (and there are a lot of offers on the market with a large percentage). Then the company gave them 200K, and return them at a commission of 0.01% and 10 transactions from one client per day, it will be almost a year. And it provided that the client did not leave earlier. In practice, these tools simply do not exist. The broker simply gives the client more leverage and in every way prevents the withdrawal of funds until the client has brought a profit that exceeds the original “gift”.
')
Another dubious point of trade is the lack of withdrawal of transactions on the real interbank market. In fact, there is no exchange - people trade values ​​of a random process against each other. In general, given the fact that the size of a client transaction is much smaller than the size of real interbank transactions, this situation may be acceptable, but only if there is full confidence in the truth of the price values ​​transmitted. And DC has a big temptation to edit quotes to ruin their customers. The main method of adjustment in this case is the generation of “hairpins”, similar to the already well-known ejection in the region of 62% on the voting schedule for United Russia at the last Duma elections. By generating similar market "events", the broker takes back the "money" that he allegedly "donated" to customers.
STP brokers
One of the most adequate ways to protect yourself from brokers whose goal is to deliberately ruin a client is to choose an STP (NDD) broker. STP stands for Straight Through Processing, and the abbreviation NDD stands for Non-Dealing Desk. These terms mean pass-through of customer applications. In this case, the broker acts as a kind of "proxy server" between the client and the market. The broker earns only on commission from the client’s turnover. Accordingly, it is beneficial for a broker to earn a client - in this case he will continue to actively trade and increase turnover, thus increasing the commission. Mostly in this format, brokers operate in regulated markets around the world and in Russia, and the most reputable brokers on FOREX also work. Among the pure STP brokers in Russia you can list OBR Forex, Yadix, Accentforex.
B-Book brokers
B-Book is the name of the technology in which the majority of customer transactions are balanced within the company. This is extremely beneficial to the broker, because instead of the commission, which is about $ 40 from a million, the broker puts $ 150 in the pocket of the difference between the purchase and sale prices. Capital, as you know, goes to any crime for the sake of 300% of the profits, and here the relative difference is even greater. In this case, there is a risk associated with the total directional position of customers - it does not happen that exactly N / 2 customers bought and N / 2 customers sold. The properties of the Wiener process allow us to estimate the deviation of the total position in sqrt (N) * K, where K is the average client rate and N is the number of open transactions. It should be noted that the more clients, the more temptation for a broker to use the B-Book scheme, because the relative value of the value of its risks decreases with an increase in the number of clients.
Brokers can protect themselves from the risk associated with a directional aggregate position in various ways. The simplest of these is the coverage of the market. It turns out that the broker earns 40 dollars instead of 190 dollars from a part of clients, but at the same time he is absolutely neutral to the market. If the broker is satisfied with this profitability and he values ​​his reputation, the use of the B-Book scheme does not prevent the clients from working adequately.
However, connection to the market and accurate execution of transactions on it also bring additional costs to the broker, in connection with which many unscrupulous companies make a further step towards B-Book. For such companies, open deals are essentially the company's position against its own clients. A company that has, in comparison with the players, a much larger monetary resource and patience, is able to outsource long losses and close deals in profit noticeably more efficiently. In addition, in such a situation, even a small “twisting” of quotes brings much greater benefit to the company - in this situation, the company does not try to take the full amount of its rate from one client, but instead takes a little, but from all of its clients.
Also, with the B-Book scheme, companies can classify clients for whom the probability of loss is higher than for the rest - clients who commit a large number of transactions, overly gambling with leverage and so on. Such clients of the company are often deceived from the very beginning - the clients actually trade on a demo account, and the company immediately takes away their funds. Since the expectation is negative in making random transactions - sooner or later the client goes bankrupt, while often having no complaints about the broker. Actually, this approach provokes the emergence of unexpectedly bold advertising campaigns and actions, which are obviously unprofitable for an honestly working broker. In fact, companies are turning into a pyramid - the money of newly arrived clients goes to advertising and payments to those old clients who are lucky and whom the consultants could not persuade them to continue trading.
Deposit and withdrawal of funds
Brokers who value their reputation and fulfill the requirements of regulators are often limited in the way they work with payments. First of all, this is due to the pressure of regulators on banks, in connection with which banks are reluctant to work with brokers and try to limit the number of ways to transfer funds to a brokerage account. Bank transfer is the safest way to transfer money, if a broker insists on this method, it means that he is most likely not a one-day company and is set up for honest long-term work. But a large number of ways of receiving funds, including through the "gray" payment systems, as well as the lack of requirements for confirmation of identity - this is a wake-up call for the client. In this case, most likely, the requirements for the provision of documents will arise in the process of withdrawing funds. The number of pieces of paper, the scans of which the broker will ask to submit for "reliability" may exceed all reasonable limits, and in this case, many clients will refuse from their earnings in order not to suffer from the documents and beyond.
Fair Broker Advertising
For an honest STP broker, this way of advertising is almost impossible to distribute bonuses to customers. The only thing that can offer such a broker - to give the client a portion of their own profits. One way to do this is to use an affiliate program. If a partner receives a smaller part of the commission from each client transaction than it would go to attracting a client “from the street” with advertising, such a partnership is beneficial to all parties (except for websites hosting advertising banners). Most brokers are willing to go for such a scheme, because it is profitable and encourages partners to attract new customers to the company. For private clients, the broker can offer a cashback - a transparent loyalty program, when a part of the commission is returned to the client. This scheme is also beneficial for all parties - the client receives more favorable conditions for bidding, but the company does not remain at a loss, since due to the large number of client transactions, it still gets its profit.
License
Oddly enough, many forex brokers , including absolutely conscientious organizations, do not have licenses to operate in financial markets. They do not need this trite in terms of the relevant jurisdictions. Many brokers are registered in jurisdictions that do not require (or did not require earlier) high reliability and do not impose capital requirements. Today, you can focus on brokers under the patronage of serious organizations such as SEC or ESMA (or their subsidiaries).
At the same time, it should be noted that after the events connected with the unbinding of the Swiss franc from the euro, many even regulated by DC turned out to be actual bankrupts. Plus, possible litigation will take place at the place of registration of the company, which makes this process almost hopeless. Therefore, when choosing a broker, first of all it’s worth looking not at the presence of a license issued by the regulator, but at the absence of negative reviews. Reputation is built over the years and collapses instantly, so good brokers value it and try to satisfy all their clients.
Summary
1. The most reliable are STP brokers, their financial result is positively correlated with the result of the client, it is simply unprofitable for them to cheat people.
2. Bonuses for depositing and opening an account is an alarming sign. An honest broker can only share already earned in the form of a cashback or affiliate program.
3. Serious requirements for crediting funds and the use of the most secure and reliable methods of payment - distinguishes honest companies from ephemeral.
4. The official license, especially from the island nation, which can fit entirely inside the Kremlin is not the most reliable sign. It is better to look at customer reviews, adequacy of support, ease of withdrawal.
On the Internet there is a lot of information about the choice of forex broker , so you always think how “unbiased” is the assessment of the author of an article. We, in turn, will try to give you the maximum of useful information that will help you in your future work in the forex market.
Source: https://habr.com/ru/post/398097/
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