Is Using A Domestic Forex Broker Better?

In the business of foreign exchange (FOREX) trading, the number of brokers worldwide is rapidly increasing. It is no wonder, since FOREX is becoming more and more popular with the masses. Brokers provide the online platforms for these budding retail traders to use. In the scheme of things, one will inevitably find that FOREX brokers are not all equal in many respects. In deciding which broker to use, a trader will consider many variables, including, but not limited to, the minimum deposit amount for opening an account; Margin requirements; The spread (brokers compensation) for the currency pairs traded; Ease of use regarding the platform traded on; Risk management features provided, such as stops, trailing stops and limits; And, the reputation of the broker in dealing reliably and fairly with its customers.

Another matter for consideration in the comparison analysis would be determining the country in which the broker is domiciled and primarily operates. Because the internet attempts to make global trading a seamless experience, one could easily overlook the fact that the company he or she is seeking to do business with online is located entirely in another country. Furthermore, even if this fact is known, one may ask why it makes a difference. We are, after all, engaged in international trading of sorts, and will probably never meet anyone from the broker's office face to face anyway. The question is a fair one which describes a fair answer.

Let's start with the fact that, at some point, you may wish to withdraw all or a portion of your funds from your FOREX brokerage account. Domestic transfer of funds, whether by bank wire or otherwise, is usually faster than international transfers. This would be a significant factor, if you needed to access your money in a hurry. In addition, due to such laws as the US Patriot Act, international transfers of monies, especially larger sums, attract greater scrutiny by government and financial agencies and may, in fact, significantly delay receipt of funds withdrawn.

Most online brokers have a "terms of use" agreement which you must accept in order to become a customer. A careful reading of the agreement is necessary for you to understand applicable provisions, including those which may limit your remedies, define the legal forum in which you may seek such remedies, and describe the type of trading procedures and strategies which you may or may not Utilize on the chosen platform. If, for example, a foreign broker limits the forum for seeking your remedies to the courts or arbitrators of that particular country, then your ability to be successful in seeking your remedy is strictly hampered by the distance between you and the country where the broker is Located. Naturally, it would be more beneficial to you if there was an affiliate office for the broker in the country of your residence. Still, the terms of use will control the choice of jurisprudence and venue, as well as the type of resolution possible. The bottom line here would be to read the terms of use very carefully before parking your funds at any brokerage.

Do not forget the fact that the FOREX is unregulated as a worldwide market. There is no central authority regulating the entire industry. Each country can chose to regulate FOREX trading within its own territory. However, this localized authority will do little to affect the overall market. A trader who chooses, therefore, to trade with a foreign broker must consider the possibility that if there is a dispute with the broker, the trader will have to find a lawyer familiar with the laws of the country in question. Such necessity could be the source of tremendous frustration in matters such as unfamiliar billing practices, elevated expenses due to distance, time zone differences, as well as language and cultural barriers.

In conclusion, despite the internet will continue to blur the lines of international commerce, choosing a domestic broker seems preferable to a foreign broker for the reasons stated above. Being able to save a pip or two on a narrowspread available from a foreign broker may not be enough to overcome the frustrations of a transaction gone bad, if such should happen. In the event you choose a foreign broker, it is better to deal with one which has a domestic presence through an affiliated office. Accessibility in a time of need lends a tremendous sense of comfort. In any event, read the terms of use very carefully, as this will be the primary document for determining your rights and obligations.

Source by Sandy Robinson, JD

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