Forex Banking – Making A Deposit & Withdrawal In FX Trading
Forex trading is a global financial product that attracts traders from different parts of the world; thereby making banking an important and integral aspect of Forex financial transactions. For a significant proportion of the previous century, almost all financial transactions used to be performed through traditional banking channels that took days and weeks to process regular payments under normal circumstances. Often, international bank transfers were accompanied by significant delays due to political and geographical restrictions, especially before the days of the internet.
Financial brokers of the past era took an incredible amount of time to process payments that could run up to weeks and months. Overseas payments were even burdened with expensive fees of transfers, which further added to the woes of people transacting huge sums of money across the globe. However, ever since financial companies started operating from an online platform, most modern organizations began offering multiple forms of payment options to facilitate fast, easy, and secure transactions to cater to the discerning requirements of the new-age investor.
The increased popularity of FX trading and the introduction of advanced payment options in the financial market have allowed traders to invest in the markets through different sources. Forex trading is a serious business venture that requires traders to be careful about the long-term security of their trading capital. The choice of a broker plays a vital part in ensuring the safety of your funds, as only the best Forex brokers can guarantee a secure environment that protects your money from financial scams. Several new regulations implemented by global financial watchdogs are specifically aimed at improving the convenience and safety of these financial transactions, which have led to an exponential rise in the number of secure payment services through both local and online mediums.
Gone are the days when traders had to wait for days and weeks for sending or receiving payments, as most financial transactions are now completed within 48 hours, regardless of the origin and destination of the payment. In this article, we will discuss all the essential features of modern Forex banking options, and how you can stay safe against financial abuse and broker scams.
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What Are The Popular Methods Of Funding Trading Accounts
Online Forex trading is facilitated through trading platforms that do not require an investor to approach a broker for buying or selling currency pairs physically. Modern FX trading is carried out virtually through state-of-the-art trading protocols, which enable brokers to connect traders directly to a liquidity provider without any dealing desk. Even though there are brokers that act as dealing desk or market maker brokers, all FX companies serve as an ESCROW agent that hold funds on behalf of a trader to open or close market orders upon a trader’s request. These funds, or trading capital, are held in a broker’s own account, which may be deposited in banks or online wallets. Due to the multiple options available to a broker, most new FX brokerages make it convenient for their clients to make payments and initiate withdrawals from the comfort of their homes or office.
Present day Forex banking can be divided into two different categories. Traders have the option of either making an online payment using e-wallets or transact money through offline mediums using local payment methods. Both payment options have their own distinct advantages and drawbacks, but it is up to the individual trader to choose a payment option according to his/her personal requirements.
Online Payment Options
Online payment methods are the most popular among a majority of retail and institutional traders. Online payment processors, also known as e-wallets, are incredibly easy to use and are also highly secure against phishing or other financial scams. Online payments are usually completed within seconds, as the funds are transferred electronically from one account to the other through packet matching. Here is a list of some of the most widely used online payment options for instant deposit and withdrawals:
- Paypal Forex brokers
- Skrill Forex brokers
- Credit card Forex brokers
- WebMoney Forex brokers
- Neteller Forex brokers
- Bitcoin Forex brokers
- WU Forex brokers
- CashU
- 2CO
- Google Wallet
Online payments are considered to be highly secure, but there may be security lapses from either the broker or the trader that can lead to large-scale financial irregularities. Traders will have to submit additional documents to its broker as proof of identification, mainly due to the anonymous nature of online payments. Some online e-wallets offer chargebacks and other features to protect their consumers against fraudulent practices, which are often misused by both brokers and traders, leading to significant conflicts of interest.
Offline Payment Options
Offline payment methods are local payment modes that require a trader to physically approach a financial service provider to make a financial transaction. Offline or local payment methods are well-suited for large institutional investors that invest a large sum of trading capital into the FX markets.
Offline payment options are still relevant in online FX trading. Here are some of the most popular offline payment methods that are provided by FX brokers:
Offline payment methods involve massive delays, especially during national holidays or during other important events. These transactions also include hefty fees, which can reduce your trading capital by a fair margin. Sometimes, there can be administrative errors while filling out forms, which can further delay the payments. In rare cases, these direct deposits may also be returned to sender minus all the fees of transactions. Therefore, you have to be extra careful while opting for local deposit options for funding your FX trading account.
Securing Your Funds
The money that you deposit for Forex trading should not be considered as a get-rich-quick scheme. The security of your funds plays a vital role in determining the amount of success you get to enjoy as a trader. Regardless of your successful trading strategy or a brilliant run of good luck, if you are unable to initiate a withdrawal of Forex profits, you are only as good as a losing trader.
The top regulatory organizations in the world have stipulated various guidelines for safeguarding client funds. Regulated brokers are required to keep their customers’ money in a segregated account, which cannot be misappropriated for any other purposes. A few regulatory organizations also have investor compensation schemes that protect investors from any unforeseen broker issues such as bankruptcy or insolvency, which compensate traders if a broker is unable to meet its debt to its clients.
Other security aspects of a top Forex broker include offering a secure online banking portal, initiating withdrawal requests on time, providing the best trading conditions, and appreciating customers by interacting with them in a friendly and professional manner. A broker that is dedicated to the welfare of its clients will always ensure the best safety of your funds. A handful of brokers goes beyond certain lengths to improve the peace of mind for its customers, which may include gaining better regulatory status, offering more control over funds to its traders, and an overall better trading atmosphere. Ultimately, traders should be able to enjoy peace of mind while dealing with their broker, which is of paramount importance in Forex trading.
Satisfying Anti-Money Laundering Laws
Being a global business, Forex brokers have to initiate overseas financial transactions to different parts of the world, which bring them directly under the anti-money laundering laws imposed by the IMF and other global organizations responsible for preventing illegal financial activities. Anti-money laundering laws and counter-financing of terrorism are top priorities for numerous countries and regulatory agencies, which are mainly enforced to ensure that all questionable market participants are denied an opportunity to ruin the integrity of the global financial markets. Brokers have several procedures in place to implement these laws that require traders to provide detailed KYC (Know Your Customer) information, show proof of identity by providing multiple identifying documents, and cooperate with the concerned authorities if there is an investigation.
Most traders would not be affected by the existing anti-money laundering laws, but there may be some restrictions for traders from several countries when it comes to FX trading. For example, it is illegal for US traders to invest their money in overseas FX brokers unless such brokers are regulated and licensed by the CFTC and the NFA. On the other hand, regulated FX brokers from different geographic locations are banned from offering its services to traders from countries in the UN sanction list, which include North Korea, Sudan, Iraq, Syria, and Iran, among other nations. Therefore, it is the duty of a trader to determine the legality of trading in their country and make an informed decision based on input from experts and other relevant authorities. Regulated brokers and their experienced staff may be able to offer the best information on the legality of FX trading according to your nationality and your present legal standing.
What Is The Average Minimum Deposit For Forex Trading?
Minimum deposit requirements vary according to the choice of the broker. Brokers that accept popular methods of funding trading accounts such as Skrill and Neteller may offer low minimum deposit requirements that start from $1, while other FX brokerage companies are known to stipulate minimum requirements of $10,000 and beyond. On an average, you can expect to open a trading account with as little as $100, but a direct market access or ECN account may cost you more. Some of the reputable mainstream brokers can offer you a trading account starting from $200 to $500; albeit, it is not uncommon for really excellent companies to offer the lowest minimum entry requirements to attract new retail traders.
Forex is a leveraged product, which offers an enormous amount of leverage to open large orders in the market with a small capital. Minimum margin requirements start from 0.1% to 2% on average, which in leverage terms means 1:50 to 1:1000. The ability to hold large orders with a small amount of money allows traders to enjoy massive amounts of profits, but on the downside, high leverage can also mean significant losses. Therefore, don’t be fooled by brokers offering a $1 minimum deposit option, as traders will be required to utilize the maximum leverage of 1:500 or 1:1000 to open a position in the market. Over leverage will undoubtedly result in a margin call (stop loss mechanism employed by a broker to prevent negative balance) with just a slight change in the market. If a trader uses 1:500 leverage for the entire amount in his trading account, a small 20 pips move in the opposite direction can wipe out the entire equity in the account.
You should also consider the fees associated with any financial transaction while making an initial deposit, as payment processors can charge you anywhere from 0.5% to 10% of the deposit amount. Online e-wallets and credit cards might charge around 2%, while bank transfers and other local payments may include larger fees. We have seen brokers waiving off these charges for their clients, but we wouldn’t recommend you to count on your broker doing this of free will. If you are confused about any aspect of the fees incurred in making a deposit or withdrawal, always consult with the finance or banking department of your broker to get verified information.
Why Do Brokers Deny A Withdrawal Request?
One of the most common problems associated with FX trading is a broker’s reluctance in processing a withdrawal request. The overall negative reputation of the Forex trading industry is not due to the highly volatile nature of the leveraged product, but a significant amount of broker scams that have led many traders into financial ruin. Dishonest brokers usually hold on to payments by citing bogus reasons, while the real motive behind a denied withdrawal request is to skip paying the trader and to pocket the money. Some brokers also trade against their clients; therefore, paying a successful client can severely diminish the operating costs of the company, which will, in turn, affect their bottom line. In other cases, brokers might not have the necessary margin required to hold their clients’ orders in the market, which may lead to bankruptcy or other insolvency issues.
On the other hand, genuine brokers may deny a withdrawal request if the trader does not satisfy any trading conditions, which are a part of the bonus or any other promotional campaigns. Sometimes, traders do not read all the fine prints of a promotional offer, which may prevent the broker from initiating the withdrawal according to a trader’s request. In our many years of experience, we have always seen that high-quality regulated brokers will always honor their clients’ withdrawal requests, as most genuine brokers try to stay away from any promotional campaigns that might ruin an otherwise excellent customer service experience.
How To Ensure 100% Success In Withdrawal Of Forex Profits
Choosing a regulated broker and reading through the broker’s terms and conditions is imperative to ensuring a smooth broker-client relationship. Understanding your trading environment is pivotal to enjoying a successful trading career, even if it means that you have to spend a considerable amount of time into understanding all the different aspects of a broker that you have chosen. A Forex broker should be considered as a partner in your Forex trading business and be aware of all the banking, and financial aspects of your partner can help you to receive 100% of all the withdrawal Forex profits that you make.
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