Posted by forex at 2:56 AM
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1. Use a registered FOREX broker. The United States has the world's most extensive regulation of FOREX brokers. As of October 18, 2010, all U.S. FOREX brokers must be registered with the Commodity Futures Trading Commission, the CFTC, and the National Futures Association, or NFA, and must have a minimum of $20 million in capital. You can use the resources of these organizations to investigate FOREX brokers.
2. Check FOREX broker information on the NFA website. At the NFA Background Affiliation Status Information Center, you can verify a broker's status and the activities for which it has received approval. You can see all the regulatory actions, arbitration awards and reparations cases involving a broker -- brokers with many entries in any of these categories should be avoided.
3. Verify a broker's liquidity at the CFTC website. The CFTC issues a monthly financial report showing the net capital figures for Futures Commission Merchants, known as FCMs -- a merchant registered to handle commodity futures orders and extend margin credit. Many FOREX brokers are also FCMs, and you can limit your broker selection to one of these, as they are heavily regulated. The CFTC monthly report shows the minimum required and actual capital on hand for a broker; the most liquid brokers have actual capital far in excess of the minimum requirements.
4. Use only ECN brokers. An Electronics Communications Network broker is the safest choice, as it does not have any financial interest in your FOREX trades; it does not trade against your position nor impose fixed bid/ask spreads. Instead it simply collects commissions on your trading activity. All ECN brokers provide a depth of market window -- real-time prices and volumes of all bid and ask orders in the FOREX interbank market -- ensuring complete transparency to all traders.