The Importance of Regulation in Forex Trading

Not long ago, forex trading was almost like the black market. There was not any rules and legislation but it was just the customer and the seller doing business through the banks and brokers.

Nevertheless, such procedures are not applied anymore since regulations and law have been established in order to trade legitimately and transparently.

It is true that forex trading has now become the largest financial market in the world. It is also decentralized in nature, which made it hard to regulate in the first place.

Trading with regulated forex brokers like Lirunex has many advantages over unregulated ones. Regulation is the only thing keeping business in check, assuring the clients that their investment is safe and, above all, legitimate.

However, the problem of unconscious behaviour in the forex market has caused regulators to tighten their grip on forex brokers and banks.

Regulatory bodies have been established by various acts of the law passed in parliaments and such enacted acts describe the regulators duties, jurisdiction, and how they will enforce laws and regulations of forex trading.

Laws enacted stipulate that all brokers, signal sellers, and investment banks, have to comply with the standards set by forex regulators.

Each regulatory body has different guidelines and enforcement depending on the country of operation and they oblige all brokers and banks to be licensed and registered in the countries that they intend to be operated always according to relevant legislation.

Furthermore, in accordance with regulations brokerage firms, are subject to periodic reviews, audits, and evaluations on a monthly/quarterly/annual basis.

Regulation is here to protect clients as it helps to build trust between them and their brokers since most clients do not have the time to go through each investment. Without the regulation, it would be too easy to steal clients’ money.

Regulations have made it difficult for such things to happen as players have to operate under strict rules and guidelines. However, there is still a possibility of dishonest deals as some individuals take advantage of jurisdictions that lack real oversight.

For example, there are countries that do not have strict regulations classifying them as high-risk jurisdictions.

As a client, you should be very careful in order to ensure that the people you are dealing with do not have ulterior motives which might cost you a lot of money.

You can do this by operating in countries that seriously enforce trading guidelines, for example, EU countries or third countries that have strict regulations.

Therefore, through regulation, the client interests are safeguarded while their investment is secured since there is compensation where bankruptcy occurs.

Having the power to issue or revoke licenses has helped clients to search for regulated and legitimate forex brokers who can trust them with their money.

In order to know if you are trading with a fake broker, just research for their names in the regulators’ list, in the specified jurisdiction as such lists are often updated.

Furthermore, you can ask for the license number and confirm licensing with a regulator to know whether you are on the safe side.

To sum up, forex trading is a very secure investment avenue for all types of investors.

Guidelines help to set limits in order to avoid slipping into unregulated and fake brokers. Just like the way laws that govern everyday life are often broken, so are regulations set to control forex trading.

These rules do not apply internationally which has enabled big players in the industry to continue manipulating the system. It is up to a client to fully safeguard themselves to avoid being conned.

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