Each currency pair contains a base currency and a counter currency. In the GBP/USD pair – The Cable – the GBP is the base currency and the USD is the counter currency. When you go long on The Cable, you are effectively buying the GBP and selling the USD. Traders who go short on the cable are selling the GBP and buying the USD. This currency pair is one of the most actively traded pairs in the world, alongside the EUR/GBP, USD/JPY, and the USD/CAD. Forex trading includes major pairs, minor pairs, and exotic currency pairs.

The global Forex market is decentralized. That means it is not controlled by any central agency, and is not limited to any country, or jurisdiction. For this reason, it’s important that there are regulations in place to standardize the protections afforded to traders. As such, multiple regulatory agencies and independent organizations cooperate to oversee the Forex market. These are the go-to organizations for traders in the event of a dispute with the Forex broker. Licensing and regulatory agencies, and various financial watchdog authorities provide the necessary safety net for FX traders.

Why is Regulation Important in Forex Trading?

Regulation ensures that traders will always have access to a watchdog authority if a Forex broker reneges on its duties and obligations to traders. Nonpayment, bankruptcy, faulty trading platforms, terms and conditions and other issues may crop up from time to time. In the event that a Forex broker does not make good on its promises to traders, they will be able to contact the respective agency in question. There are multiple regulatory agencies in operation, including the Cyprus Securities and Exchange Commission (CySEC), the Financial Conduct Authority (FCA), the Australian Securities and Investments Commission (ASIC), as well as the Financial Services Board (FSB).

What Should You Look for in a Forex Broker?

Regulation is one of the most important features of credible brokerages. But there are many other factors that need to be considered when choosing one FX broker over another. Since many brokers do not cater to traders in the US and other countries, it’s important that the broker is fully licensed and regulated to offer Forex trading in your country. Next, traders should take the number of available financial assets into consideration. These include major pairs, minor pairs and exotic currency pairs. Besides currencies, Forex brokers provide a wide range of other financial instruments such as commodities, indices, and stocks. Perhaps the most important feature of any online broker is customer service. Traders are advised to contact customer service prior to registering and depositing at a Forex broker. Traders should seek out brokers that offer professional, prompt and courteous service.

Other pertinent issues include fixed or non-fixed spreads. Is the broker a dealing desk, or a non-dealing desk? Spreads are another consideration, since the greater the spreads, the less the profits. If you are trading with just a few pips (price movements in Forex) a large spread will eat into your profits. But before you begin trading, you should practice Forex trading on a demo account. Learn about leverage and margin, and how to use that to your advantage. Leverage allows traders to trade a large position by simply placing a percentage of the total trade down. Leverage can work in your favour, or against you. There are many other factors that are important to FX traders, including the range of educational resources provided by the Forex broker. The more information, the better. Since currencies are affected by monetary policy, fiscal policy, GDP, retail sales, sentiment etc., these factors should be taken into consideration.

Trade Forex with Confidence: Trust but Verify

Many Forex brokers will provide a wide range of features to traders. It is important to evaluate these features by comparing Forex brokers. The Top 8 Forex Brokers offers comprehensive insights into the world’s best Forex brokers. Rest assured that our in-house Forex experts have evaluated the merits of each broker, and we have also highlighted areas for possible improvement. Regulated brokers are required to maintain cash reserves to ensure that contracts are executed efficiently. They are also required to maintain segregated accounts to protect clients against the liquidation, bankruptcy or claims against the broker. It is always a good idea to verify the licensing and regulation of a Forex broker before you deposit and trade with them.