Are brokers safe? Yes and no. A lot of brokers operate as market makers and take the opposite side of your trade, meaning if you lose they win. This of course, means it is not in their best interest for you to win and will actively manipulate and act in an unscrupulous manner such as manipulating prices and declining withdrawals. However, on the flip side, if you choose a large ECN broker where the broker doesn’t take the opposite side, then it is safe. Large brokers such as FXCM are safe. Do not fall for the “deposit bonus” or “no spreads”, brokers are businesses, if they don’t make money via traditional means such as brokerage/spread, then they will make it another way. There is no such thing as a free lunch either, bonuses have conditions attached and you will most likely not come out ahead.
Is investing in forex safe? Yes and no. No, because you can blow up extremely quickly if you don’t know how to use proper money management. Yes, because you can earn consistent profits if you use proper money management and a trading plan. However, be warned that the number of retail traders who are profitable is less than 10% and of those, not many can make a living trading.
by Henry Fung, Investment Advisor & Model Manager – Stock Trading Room.