Top 10 Reasons Not to Deposit With Forex Brokers… Unwisely
Got money & ready to deposit with a Forex broker of your choice?
Here are 10 reasons why you should NOT do that at once… right away… right now… because chances are:
You don’t know your broker well enough
That’s true for 98% of traders since they “meet” Forex brokers online and hardly ever in person.
Many stories, promises and lies can be told online.
Advice: at least call your broker to evaluate their phone support, professionalism and knowledge level. Find their address online and verify that the office exists in reality. Verify company address with registration authorities in their country. Ideally, of course, visit the broker’s office or representative office in person.
You haven’t test-traded with the broker for at least 2 months
Do you know how your broker handles major economic news releases, and what you’d be seeing on your trading charts?
Spikes? Frozen trading platform? Blocked trading or rejected orders? etc. etc.
Are you familiar with slow trading sessions and active sessions your broker normally has?
How trading weeks start on Monday and end on Friday? What and if can you trade during the weekend? What spreads do you get there? etc. etc.
Do you get many re-quotes? Unusual widening of spreads? Limited scalping opportunities? Difficulties closing trades or problems with honouring stop orders?
The list can go on and on…
Advice: Test-trade on a demo as long as you need, but then test-trade live for at least 2 months with the minimum possible deposit.
Feel the charts responsiveness, features, execution speed, live spreads, news trading, scalping, timely exits, stop losses and trailing stops etc. etc.
You might not have enough skills for live trading yet. If you do, move on.
Most of us think they do. Yet, we hear again and again that 95% of traders lose their money in Forex.
All that due to poor money management, lack of trading skills & control of emotions: greed and fear in trading.
If this is not about you, move on.
Advice: the very minimum deposit you’ve made to test-trade live trading is also going to reveal & prove your true trading skills to yourself. Smaller risks will be easier to handle and any mistake you make will also be less costly. It’s a great way to confirm that you’re ready for a serious investment.
You haven’t tried to withdraw profits/money yet
Depositing with any Forex broker is quick and simple. Unfortunately, this rule does not apply to withdrawals.
It’s not uncommon to hear that traders cannot withdraw money, have to wait for weeks to receive money back or are denied profit withdrawals altogether.
Such horror stories can go on for months, oftentimes resulting in cancelled profits (very common), very late return of initial deposits (consider yourself lucky at this point), inability to contact or receive a reply/support from the broker, and in the worst-case scenario – the dissolution of the company along with customer funds.
Advice: Try to successfully withdraw funds at least twice. Evaluate the speed of withdrawal, and the way the broker honours and accepts profits you’ve made so far.
You’re not protected by Regulatory authorities to the extent you think you are
Starting with offshore brokers (Cyprus, BVI, Seychelles, St.Vincent and the Grenadines etc. etc.) and ending with 80% of all other existing brokers – their business registration in the country of origin offers very limitedly to no protection to investors. All those status certificates, licenses and company documents were shown to you, might seem like a solid foundation, but… in reality, they barely have any value other that ensure that you’re dealing with a registered business as opposed to straight out online fraud, which is not bad by itself if you think about it. Forex has no central exchange, no central regulation and thus cannot be controlled to the full extent on the global scale.
If your broker is the US, UK or Swiss-based, you’re covered by investor protection plans.
With the US you have the strictest regulator (CFTC, NFA) in the world.
In the UK you have to ensure your broker is regulated (Authorized) vs registered (EEA Authorized). More on that: FCA UK regulated Forex brokers
With Switzerland, you’re trading with Swiss banks – the most robust financial institutions in the world.
Advice: if you’re depositing a fortune, think about dealing with a Bank. Chances are your local bank also offers Forex trading (though spreads and fees might be less competitive). If you can’t trade with a bank, opt for the largest most reputable Forex broker you can find based on their years in business, regulation status and traders reviews. If you can’t find such a broker, don’t deposit a fortune. Start small, with the very minimum deposit, trade for a while & then add on funds in stages proportional to the level of confidence gained with the broker.
You’re planning to earn living by trading Forex
Reasonable expectations should be to earn extra income trading Forex, not primary income. Top professionals can rely on earning a sustainable income from Forex trading alone. In fact, few professionals will do so by trading Forex alone (Stocks, Options, Bonds, Securities etc. come to play at that point). Your experience is likely to be great for sustainable money management of average to a reasonably large investment. But it’s unlikely to be enough to manage a significant amount of funds, which bring true large income.
Advice: aim to earn extra income first. Possibly try yourself as a signal provider for others, and later a money manager who deals with high investment portfolios of own clients.
You’re planning to deposit more money than you can earn at your current job over the course of 6 months
The rule of thumb: “Never trade with money you can’t afford to lose”. If your 6-month income has no financial impact on your current savings, then go ahead. Otherwise, the only advice is below:
Advice: don’t do it.
You’ve bought a trading system or planning to rely on someone’s trading signals
Truly profitable masterpiece trading systems are never sold and will never be sold. If someone makes millions trading with his/her system, why even bother selling it for a few hundred dollars here and there? Makes zero sense, both logical and money-wise.
There are systems that will be profitable, yes. But don’t expect more & a lot.
Same with trading signals. Trading signals from brokers, for example, are aimed to make your trade more actively and, hopefully, more confidently. There will be ups and downs, but again, no miracle profits. Other trading signals being sold online or offered for free – all will be a part of some sort of commercial project, where project owners earn their income not by trading, but by generating trading signals. This should be clearly understood & approached accordingly. Unfortunately, many traders follow such signals and systems blindly.
Advice: don’t buy trading systems or trading signals. Don’t assume that free signals and systems will help you earn money either. Learn to trade yourself, develop your own approach and system – it’s the only way to achieve higher results.
You have been treated like a VIP by the broker and convinced by it
Tell any broker that you’re about to deposit, say $10,000 or more, and any broker will go above and beyond to convince you to deposit with them. After all, this is how the Forex industry works – they need depositing clients. Being now a “VIP target”, you’ll be hearing anything and everything you want to hear (best conditions, secure accounts, lowest fees, personal money managers, free signals and training, etc. you name it) all effort will be made to convince and convert you to a client. No efforts spared.
Advice: Don’t share your phone number with all Forex brokers on your list right away. Start with emails first, or you risk finding yourself talking on the phone for hours with every sales representative out there. If you’re planning on a large deposit, don’t reveal it, at least not the whole sum. The aim being treated as an average customer first, so that later you can compare the “upscale” services. Plus, spare yourself an ordeal to be eaten alive by hungry brokers’ salesman “sharks”. You’ve been warned.
You believe that not a single reason above matters
Congratulations! You’re filthy rich.
In such a case, just enjoy your trading!