How to Choose a Secure Broker

Choosing a broker isn't just about selecting the one with the best features and services, let alone the one that generously gives out bonuses or gifts. Choosing a broker is primarily about which one provides the best security guarantee for the funds you deposit and the profits you make. Even if the commission fees, spreads, and other costs are relatively higher than other brokers, a broker that provides a security guarantee should still be your top choice.

Of course, facilities and quality of service are important. However, if your funds are at risk of disappearing and your profits are not paid, then those facilities and services will be useless. After all, you're trading to make money, not just to enjoy the broker's facilities and services. Therefore, choosing a secure broker is an important step that every trader must take. Because this concerns their own fate, the fate of the money they deposit, and the fate of the profits they painstakingly accumulate bit by bit.

Limitations in Assessing a Secure Broker

Frankly, choosing a truly secure broker is a difficult task. As traders, not many of us really know how brokers work. Although we can also see information about brokers on their websites, normally that information will only show the good parts about that broker. There's no way a broker would admit their weaknesses. Brokers will definitely promise many things, including fund security, to their clients or potential clients, even if it's just an empty promise.

In situations like this, we normally need information from a third party to be able to assess objectively. For example, websites that review brokers and give ratings related to the quality of service and security of those brokers. But, the problem is that many of these websites have significantly different assessments, sometimes a broker has a high rating on one website but a low rating on another. Even though the assessment criteria used are almost the same, namely related to costs, facilities, and also security. This certainly makes us confused to determine which information is true and which is false from both assessments.

After those two sources of information do not provide a clear assessment, then we can only refer to the reviews of other traders who have or are still using the services of a broker. We can see reviews left by users on online review sites. But, this is also problematic, because these reviews are not entirely purely based on their real experience when using a broker. Often people who leave reviews do so because it becomes part of the tasks that need to be completed when they are going to participate in certain events, such as giveaways, contests, and so on. So these reviews cannot always be relied upon to assess whether a broker has good quality.

How to Choose a Secure Broker

Although it's difficult, there are still several things we can do to choose a secure broker. But, don't think that this method is truly perfect. There are actually many loopholes, but this is the best way at the moment, better than looking at information on the broker's website, referring to third-party reviews, or looking at fake user reviews on online review sites.

#1 Choose a Legal Broker

Whether or not the broker entity is legal can be an important security indicator. Because legal brokers have legal ties so they have rights and obligations that must be carried out.

Legal brokers are usually marked with a license issued by the relevant regulator. So far, traders only consider brokers with licenses important without paying attention to whether these licenses really protect them and guarantee the security of their funds. They think that licensed brokers are automatically safe and are considered legal. In fact, a broker's license is only a sign that the broker is subject to and complies with the regulations of a particular country. In other words, brokers will follow the rules set by the regulator only when offering their services to traders who are in the jurisdiction of that country.

The licenses held by brokers do not indicate that they are legal. A legal broker means that the broker has a license issued by a regulator in your country. Even if your country's regulator is not as popular as regulators like ASIC, FSA, or FCA. But, it is your country's regulator that has the legal power to force brokers to submit and be responsible for the security of your funds.

For example, if you are a client domiciled in the UK, then legal brokers in your country are brokers that have an FCA license. Because the FCA is the regulator responsible for the UK jurisdiction.

Meanwhile, brokers with other regulations, such as ASIC, FSA, and so on are not considered legal for you. Because these regulators are in different jurisdictions so they have no authority over what happens to broker clients in the UK.

#2 Consider the Broker's Operating Duration

In addition to its legality, you can also choose a broker with a long enough age. This is not directly related to the guarantee of the security of your funds. But, imagine how difficult it is for that broker to compete with other brokers for that period of time and try to improve their reputation in the eyes of traders. It's hard to believe that such a company would destroy their own business that they've built for years. They will definitely be careful and try to continue to maintain the trust of traders in them so they can develop further in the future.

It does not mean that we are cornering new brokers. Because the criteria for broker security are not only about the duration of their operation, but there are still other factors that must be considered. If there is a new broker, but has met other security criteria, then that broker might be better than older brokers who do not meet those criteria.

#3 Pay Attention to Negative Reviews

Previously, I mentioned that trader reviews on online review sites can often be unreliable, particularly when it comes to positive reviews about brokers. However, negative reviews tend to be more genuine and revealing.

You might be skeptical, thinking that bad reviews could be planted by rival brokers trying to sabotage their competitors. While broker competition is fierce, I haven't personally witnessed any direct feuds between brokers resulting in fake negative reviews. Instead, the more common practice is for brokers to generate fake positive reviews to boost their own reputation.

In addition to searching for negative reviews on online review sites, consider joining independent trader communities not affiliated with any specific broker. While these communities may not offer direct recommendations for good brokers, they can be invaluable sources of information if a broker is suspected of any wrongdoing. You'll likely receive timely warnings about potential problems.

From any point of view, choosing a secure broker is not easy. But no matter how difficult it is, as traders we still have to do it. Because this is related to our own funds and our long-term career as traders. Don't let the funds we use for trading and the profits we work so hard to earn disappear just because we are not careful in choosing a broker.

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