By Yael Warman

Forex trading is a little bit like falling in love. You go in bright eyed, thinking everything is rosy, feeling positive and so sure things are going to go great that you feel as though you were walking on air. You go on a few first dates, get lost in each other’s eyes and make the most romantic promises. Same goes for your broker, you’ll be promised the world and you believe you’ll be rich. It’s once the haze fades away that you start seeing things for what they really are: A bitter ex-boyfriend who won’t return you favorite CDs or in the case of your broker, a sales person who points at the small print in the contract that states that withdrawals are only allowed under very specific circumstances, which you of course, don’t meet. When falling in love, there is not much you can do to foresee whether you’ll get your CDs back, but good news is that when trading Forex, the fine print says it all, you just have to read it.

A lot of newbie traders go into Forex trusting what their broker promises. They do get a copy of the Terms and Conditions, but when you are about to make thousands of dollars, who has time to read Terms and Conditions? Well, you should, because when things go south, the T&Cs are the only thing standing between you and your money, but if you can’t bring yourself to reading the entire document of mumbo-jumbo, at the very least pay attention to the following sections:

• Regulation. Where is the brokerage regulated? If the brokerage is not regulated, beware.

• Ensure that the services provided by the broker align with the regulatory standards of the jurisdiction in which the broker is licensed, meaning, does the jurisdiction in which the broker is licensed allows the services that the broker will provide you with. This should be discussed in the introductory paragraph.

• Fees. Will your broker charge you a fixed spread, a variable spread or a commission based on a percentage of the spread? Whatever the case, make sure the T&Cs contain a clear explanation of the fees that will be charged, including examples.

• Check the names and nature of hedging counterparties and whether their relationship with the broker is at arms-length.

• Withdrawals, bonuses and payments policies. Under what circumstances are you allowed to withdraw your funds? More important, what types of circumstances prevent you from withdrawing your funds? Most brokers give traders bonuses to incentivize deposits and trading. What are the terms surrounding such bonuses? When and how are they paid?

• Trade cancelation. Is the broker entitled to cancel trades and if so, under which circumstances.

• Jurisdiction for dispute resolution. In the event of a dispute with the broker, is it resolved in arbitration or in court? Who pays for the fees? Where is it disputed? Under the laws of which jurisdiction? Most contracts will be disputed either in the jurisdiction of the broker’s choice or the regulator’s requirement. If the broker is not regulated and the jurisdiction is one of their choice, 10 out of 10 times it will benefit the broker. If the dispute is required to be resolved in the jurisdiction in which the broker is licensed, chances are the law is on the trader’s side.

There you have it. If you are just too eager to begin trading and reading pages and pages of small legal print seems too overwhelming, at the very least, do yourself a favor and read the clauses we recommend above. We want you and your FX trading to have a long, loving relationship.

About the Author:

Yael Warman is a creative writer with a strong background in marketing and advertising. Yael has been a writer for over 10 years and has worked for clients in various industries as well as her own companies and is currently the Content Manager at Leverate.