Basic Requirements And Rights Of A Regulated CYSEC Broker
CySEC is abbreviated for “Cyprus Securities And Exchange Commission”. It is a regulatory body that takes care of the regulations of numerous financial service providers across Cyprus, including the financial markets. Thus, CySEC regulates both the stock and the forex market. Additionally, the regulator monitors the Cyprus Investment Firms or CIFs and those working in this industry. Every CIF employee must possess specific knowledge and qualifications to execute their job responsibilities. They must comply with all the anti-money laundering and compliance procedures at all costs. Read More
CySEC : A Flagship Regulator In Europe
CySEC has a significant role to play in Europe’s financial markets. Since the investment-friendly laws have attracted many brokers to offer Forex as well as CFD trading services, the role of CySEC has become more significant in overseeing the financial service industry. CySEC-regulated brokers are highly trustworthy among traders across the world.
Who Is CySEC Responsible To?
CySEC is a member of the EU and a signatory to MiFID/MiFIR; it operates according to the rules of ESMA (European Securities And Markets Authority). Thus, CySEC is required to follow the rules and guidelines of ESMA as far as its operations are concerned. For Example, when ESMA banned the trading of binary options, CySEC had no other option but to end the licensure of companies that offered this product. The other companies who already had the license were forced to switch to other product offerings or close their business. Furthermore, CySEC also has to follow the leverage and margin requirement restrictions imposed by the EU. Thus, CySEC is directly answerable to ESMA.
Also read : Why Should Traders Choose Low Spread Brokers?
Basic Requirements For CySEC-Regulated Brokers
CySEC oversees that all the brokers adhere to certain rules set to ensure they remain transparent in their business conduct in the financial markets. Their main objective is to instill confidence into traders so they can invest their hard-earned money without stress and tension. Following are the basic requirements that all brokers have to follow who wish to work under CySEC’s oversight:
Every brokerage that is subject to be regulated by CySEC is called CIF (Cyprus Investment Fund). These brokerages need to have an appropriate license. There are specific requirements for obtaining a broker license in Europe:
- The license information should be displayed on the home page of the broker’s website.
- According to CySEC’s license system, the broker is alloted a registration number which also needs to be shared by the broker on the website as well.
- ESMA rules also require all CySEC-regulated brokers to mention the number of their clients who have lost money by trading with them. In addition, they must comply with the leverage and margin requirements for Forex and CFD trading.
A significant feature of CySEC is that it regulates CIFs and also the employees who work there. All the employees, from entry-level to managerial positions, are covered by CySEC. Consequently, CySEC requires all the people working with a CIF must have the required qualifications. Furthermore, CySEC has certification registers with all the information of the persons qualified to work in CIFs. There are two examinations that CySEC requires you to pass to work in CIFs: the Basic Exam as well as the Advanced Exam. Both of these exams are meant to test people’s knowledge about Cyprus’s investment culture. Hence, individuals who wish to execute the job role in a CySEC-regulated firm are required to pass both the examinations designed by CySEC. If they pass, they will be able to execute the following responsibilities:
- Receiving and sending orders for financial instruments
- Executing orders on behalf of clients
- Managing portfolios and providing investment advice
CySEC-regulated brokers can take customers outside of Europe. However, the below guidelines must be followed with respect to conduct, trade practices, and reporting conditions. Some of them are:
- The brokerage can never be a sole proprietorship, meaning two or more persons should be responsible for managing the brokerage’s operations and affairs.
- The brokerage must have a physical presence in Cyprus with appropriate staff and personnel with suitable CySEC qualifications.
- The services offered by CIF must be included in the application sent initially with respect to the CySEC license.
- The broker is required to contribute to CySEC’s Investor Protection Fund and have a working capital of €750,000.
- Brokers must be insured between €1m and €1.5m to compensate for losses from negligence.
- All CySEC-regulated brokers are required to submit reports to CySEC for client deposits and withdrawals as well as the brokerage’s transactions.
- CySEC has a list of regulated brokers on its website and offers information about not-so-reputed brokers in the market.
What Are The Merits of Working with An ECN Broker?
The advent of technology has made it possible for traders to invest in the financial markets safely and efficiently, just like prominent financial institutions. One such facility is ECN (Electronic Communication Network) which is basically a computerized system that automatically buys and sells orders with market securities. Read More
In simple words, an ECN broker offers its clients direct access to the market participants via interbank trading systems so that the buyers and sellers can find counterparties with respect to their trading positions, however, without involving any middlemen. You can consider it just like an exchange where the clients enter bids into the system as well as can communicate with other major market players to get the best price for executing the trades. Hence, the best benefit of working with an ECN broker is they make trading quick and efficient. In addition to this, they tend to expand the geographical scope of the market players.
However, before going into ECN brokers in-depth, let’s take a glance at various forex broker types that you can find in the market today.
Market Makers, ECN And STP Brokers
Just like the name suggests, market makers are the ones who actually make the market. A market maker fixes the bid and ask prices on his system, which are then displayed on the platform for traders so that they can trade efficiently. Moreover, he never hedges a trader’s position with liquidity providers. Hence, they have to pay winning customers from their own pocket. They are always on the opposite side of the clients’ trade. If they win, the client loses and vice versa. Thus, market makers’ interests are never aligned with a trader’s interests.
Forex brokers who aren’t market makers are either ECN or STP (Straight Through Processing) brokers. They both collectively are referred to as “non dealing-desk brokers. Out of the two of them, ECN brokers are preferable because they never resort to price manipulation and slippage methods. They directly source prices from a pool of liquidity providers, which comprises banks, financial institutions and hedge funds. The best thing about ECN brokers is that they provide clients with the best possible spreads.
Opening an account with ECN brokers requires minimum capital. A significant feature of ECN brokers is that they offer tighter spreads, which can be as low as 0.0 pips.
What Are The Advantages Of Dealing With A True ECN Broker?
The word “true” has great significance here because you can find many brokers in the market who claim to be ECN brokers but actually follow the STP trading model. They never mark up their spreads, and hence if the broker’s website mentions a dealing desk, it means they aren’t a true ECN broker and pretending to be one.
Here Are The Merits Of Working With An ECN Broker
- They offer advanced communication technology, such as FIX protocol, that helps them source the most efficient prices from the liquidity providers and deliver orders to them for further execution.
- ECN brokers have great networks to access, which are very much efficient for forex trading, even for after-hours trading. This offers traders flexibility who are not able to trade during normal trading session timings.
- With ECN brokers, trades can be executed instantly as the prices are streamed live, and the final prices are confirmed immediately.
- ECN brokers have a high execution speed, which makes them a perfect choice for EAs and algorithmic trading.
- You can find certain ECN brokers in the market who specifically work to help small traders access the best prices and spreads, just as institutional investors can.
- The spreads offered by ECN brokers are tighter than those provided by other standard brokers.
- ECN brokers have no requotes and slippage. Additionally, they work with maximum efficiency and transparency.
- ECN brokers charge less commission and fee. Also, they provide more time to their clients for trading.
- ECN brokers charge a fixed commission per trade.
- All the ECN brokers have access to the same prices at any point in time.
- ECN brokers provide all the historical and current data to the participants. This helps in market research and analysis and minimizes manipulation of prices at all costs.
- With ECN brokers, traders can trade on neutral prices based on real market conditions.
- Traders have an option to use their own personal trading methods and risk management strategies with ECN systems to access a wide range of data for their own benefit.
Why Should Traders Choose Low Spread Brokers?
Forex trading is a well-regarded market and is preferred by several traders across the globe. Spreads are an extensive and essential part of forex trading. In simple terms, spreads refer to the difference between the bid and ask price of the forex currency pairs. Furthermore, it is also called the difference between two rates or two indices. Many forex traders use spreads to measure the comprehensive market liquidity. Read More
Before spending much in the forex market, it is essential to understand the concept of spread. Forex spreads can be high or low, depending on the trading volume. Typically, spreads are expressed in pips. Spreads are also influenced by trading volumes, demand, and supply of certain forex market currencies.
What Is A High Spread?
Generally, these spreads are suitable for active and dynamic forex traders. When the spread enhances, the comprehensive risk is also improved, leading to the chances of losing more capital than normal. High spreads highlight a significant difference between the prices; therefore, the individuals may lose considerable money.
What Is Low Spread?
The low spread refers to enhanced liquidity and less volatility. Therefore, while trading under low spreads, the overall transaction cost reduces significantly, and the traders have to incur fewer overheads. A low spread is also called a tight spread, and as compared to higher spreads, it is beneficial to trade under low spreads.
Generally, the spreads in the forex market are variable. Therefore, once the difference between the bid and ask price changes, the spread also changes.
Benefits Of Trading With Low Spread Forex Brokers
As mentioned above, low spreads are more beneficial than high spreads; the same stands true even in the context of ECN forex brokers. A trader receives more benefits when trading with a low spread forex broker. Following are the multiple benefits received by trading with a low spread forex broker:
- Less Trading Costs: Forex traders with low spread forex brokers usually incur low trading costs. Therefore, the traders become more financially stable and transactional overheads are reduced to the minimum.
- More Trading Volume: The significant benefit of trading with low spread forex brokers is that the traders can trade more volumes. As the traders become more financially stable, they can maximize their returns by investing in more trades in a single day. While on the other hand, such a benefit cannot be achieved when trading with high spread forex brokers as the overall risk enhances, and the traders who are not willing to risk more money may face losses.
- Direct Trading: When trading with low spread forex brokers, traders experience direct trading. It is because the currency pair’s prices are quoted near the market price and do not include upfront charges and other commissions. Therefore, the traders get to experience the forex market.
- Easy Calculation: The forex traders generally trade in those currency pairs that yield massive profits. The low spread forex brokers ease the calculation of overall gains and losses that a trader may receive from any forex trade. In other words, the traders can easily and swiftly calculate the potential losses and profits. Besides, it directly influences the trading decisions of the traders.
- Beneficial For Day Traders: Day traders generally trade for a short span and tend to gain more profits via their trading. Therefore, low spread forex brokers are highly beneficial for day traders. The traders will earn more profits and pay less. In other words, making capacity will surpass spending, leading to enhanced profits and informed trading.
Therefore, from a trading standpoint, the low spread forex brokers are great. The traders can make better returns and engage in more profit-making trades.
How To Trade Better With Low Spread Forex Brokers?
Once the forex trader has selected the low spread forex, it is time to start trading in the forex market.
- Select the currency pair that you wish to trade.
- Consider the difference between the buy and sell price.
- Once the difference is ascertained, an informed decision is made, and the traders can effectively trade in the forex market.
The Bottom Line
Therefore, trading with low spread forex brokers can be beneficial. The selection of a broker can make or break a deal; therefore, it is significant to find the ideal low spread forex broker and commence trading in the forex market to earn more profits.
Five Useful Tips To Choose The Right Forex Broker
Foreign exchange or commonly known as forex, is a decentralized market where traders can buy and sell currencies. Although a lucrative field, you need to know everything about the forex market before you initiate your trading journey. A forex broker is someone who establishes an ideal link between traders and the forex market. Read More
Why Do You Need A Forex Broker?
There are numerous reasons why you need a forex broker:
- Forex brokers help you access the forex market. In their absence, you can’t trade in the forex market.
- Forex brokers help you take advantage of leverage. Leverage refers to the amount you borrow from the broker to open large positions.
- Forex brokers provide you with the best trading platforms for trading currencies. Most brokers offer their own proprietary platforms, while others have the most popular ones, like MetaTrader.
- Forex brokers are also helpful in receiving impeccable advice for experts. Many brokers provide their clients access to EA (Expert Analysis), which is a valuable tool for new and experienced traders.
- Forex brokers offer excellent customer support for clients who have questions and queries.
You can search online for the best FX broker for trading. However, it can be quite daunting to choose the ideal broker. So, in order to help you narrow down your choice, here are some essential tips that can help you make the right choice.
Evaluate Your Needs
Before you search for a forex broker, you need to figure out what kind of trader you are. Additionally, you must form a clear understanding of your trading objectives. Furthermore, brokers offer different trading platforms with different minimum requirements and trading fees. Thus, you need to determine your budget first and try to understand the market as much as possible before hopping onto it.
Secondly, you need to ensure that the broker’s trading platform can provide you easy access to the forex market and is equipped with all the essential tools for fundamental and technical analysis for easy entry and exit of trades. A reliable trading platform is important if you want to trade forex. So, it is essential to choose a forex broker that offers an easy-to-use trading platform and has all the relevant tools and features for a great trading experience. You can also check if the broker has some customized options available for your specific needs.
Traders should always select a forex broker with a sterling reputation in the market. They must ensure that the chosen broker can offer outstanding services with minimum risks. It is also vital to check the terms and conditions to know if they charge any hidden fees. An ideal broker always maintains transparency and communicates effectively to keep the clients in the loop. The potential of a broker can also be determined by checking customer reviews. However, make sure to check the authenticity of the reviews for better credibility.
One of the most crucial things when selecting a forex broker is regulation. Regulation is vital as it offers protection for your investments. You should open a trading account with a forex broker regulated by standard regulatory bodies. A regulated CYSEC broker ensures the safety of your funds and the broker’s integrity. They always comply with certain rules and regulations meant for investors’ protection and promote a safe trading environment.
For Example, if a broker is regulated, they tend to maintain high standards. This protects you (as a trader) from any fraud or misconduct on the broker’s behalf. It’s also worth noticing that the same regulator regulates not all brokers. Additionally, some brokers are regulated by multiple regulators; others are regulated by just one.
Test Out The Broker
It would be best for you if you could personally test out the broker you are interested in. For Example, you can open a demo account with them, check their trading conditions, and understand their trading platform’s reliability. Leverage is also something you can look out for in a forex broker. All this will help you understand the efficiency of the forex broker before you open a live account and start trading.
By considering all the factors mentioned above, you will be able to choose an ideal broker for a remarkable trading journey. It will help you maximize your efficiency when it comes to your forex strategy and fulfill your expectations.
The Best Tips For Forex Trading That You Can Use In Crisis
The forex market has recently undergone so many ups and downs due to the Russia-Ukraine war. While some traders made a lot of profits from the price fluctuations, others lost a considerable share of their capital. So, what can be done in such volatile times? To guide you through the same, here are some tips you can follow in dealing with price swings like a pro in a crisis. Read More
Develop A Risk Profile
When the market turns volatile, your first priority should be to determine your risk tolerance capacity. Yes, volatility can indeed offer you huge returns, but it also has the potential to exhaust your trading account. Consequently, it is important to determine how much risk you can actually bear. Additionally, you can minimize your risk by starting with smaller capital with no or very little leverage if you are risk-averse. This will ensure that when the market turns in your favor, you can make some modest profits; if not, your losses are not so much that you can’t bear them. Thus, one can say there is nothing right or wrong in forex trading; it all depends upon your risk profile.
Make Your Trading Plans Based On The Present Time
Your next goal should be to design a solid forex risk management plan based on your observations and the data you collect. Your plan should offer you a versatile overview of the forex market, thus helping you to make effective decisions. Beginners often used to copy trades of other professional traders. However, copy trading is not for all; some might need a plan specific to their trading needs. For them, a trading journal is a suitable option where they can keep a record of both successful and unsuccessful trades. With the help of a trading journal, they can evaluate their actions and make changes timely to manage their forex trading risks.
Open A Demo Account
A demo account is an incredible way to try out your strategies and learn new trading skills in real-time market conditions. It is a risk-free account with no real money involved but offers you full access to all the features and capabilities of the trading platform. You can easily learn how to trade with a demo account without risking your real money. After you have practiced on the demo account, you can then go ahead with live trading on the same trading platform.
Focus On Major Trading Instruments
Although there are many FX pairs available in the forex market for trading, it is highly recommended that you adhere to major forex pairs in times of crisis. The reason is they remain quite stable during such volatile times. Even during the crisis, major forex currency pairs such as USD/EUR, USD/GBP and USD/JPY can offer you a significant amount of liquidity. Consequently, traders don’t face a problem in opening and closing positions as there is a constant demand and supply of these currencies available. Apart from this, economists and forex experts always focus on news and events taking place in major economies of the world during the crisis. All this leads to informed trading decision-making.
Define Risk-Reward Ratio
Also, you need to determine your risk-reward ratio so that you can counteract your trading losses. It doesn’t matter if you have lost one dollar or a thousand; you are a loser. The question is how much time it will take to cover up the losses and make a profit. You can also compute the trade worth with the risk-reward ratio.
Keep Your Emotions Intact
During risky times, you can set a daily trading limit for yourself so that you do not expose yourself to any risky situation. Don’t be an emotional fool when trading forex. If you are losing money, you should take a break for some time to review your trades. Furthermore, if you are making money, you should know when to quit so that you can keep your profits. Hence, it is important for a trader to know when to call it a day. It’s a sign of a mature and disciplined trader, the two foremost qualities every trader should always have.
Trading can be tricky in crisis; however, if you go through the tips mentioned above, you will be able to trade safely. Moreover, disciplined traders can make profits and minimize losses in every trade they execute, irrespective of the crisis happening in the world.
A Comprehensive Guide On ECN Forex Brokers
In forex trading, the two most important factors that can lead you toward success are accessibility and liquidity. Most “traditional” brokers that you see in the market are “dealing desk brokers”, meaning they act as a middleman between the trader and liquidity providers such as banks, traders and other brokers. However, some brokers prefer to bypass all of this and want to directly access the market at all hours of the day. This is why they opt for ECN brokers. ECN is an abbreviated form of “Electronic Communications Network”. It is an efficient tool that helps traders in automated trading and have direct access to the forex market, irrespective of the traders’ account size or leverage. Read More
There are numerous benefits for traders to use ECN brokers if it’s done properly. If you are willing to cut out the middleman from your trading, it would be a good idea to consider a brokerage that offers a comprehensive ECN system as a part of their service offerings. However, before you do so, make sure you go through this comprehensive guide on ECN brokers. In simple words, ECN is a network that brings together various market participants under one platform enabling them to buy and purchase forex with each other. ECN brokers offer automated and algorithmic networks for traders to have direct access to the forex market. There is no dealing desk involved. Thus the traders can directly participate in the market to search for the best buy and sell prices. Many brokers are market makers and charge a “spread” in exchange for the services offered (such as facilitating forex trades). However, when you use an ECN broker, you pay a low spread. Often, you don’t have to pay anything at all with an ECN broker. The reason is that ECN brokers directly publish orders entered by numerous market participants to individual traders as well as third parties. Such orders can then be executed automatically through an algorithm that can match the buy and sell orders at the best available price in the market. Thus, ECN has broken the barrier for traders to access the forex market by efficiently bringing traders (both individual and institutional) and liquidity providers in the same place. One can name numerous reasons for the popularity of ECN brokers among traders. Certain types of traders don’t agree with the forex spread system because it enables the market makers to fix their prices independently. They see this pricing policy as rather non-competitive, which puts them at a disadvantage. In addition, spreads are hardly ever transparent, meaning it’s not clear why traders are being forced to harbour certain spreads. At the same time, ECN brokers offer a highly competitive and fair pricing system where buy and sell prices are determined through an auction. Additionally, an ECN broker never takes a position against the trader, something which is a regular practice for standard brokers. Hence, if you want to avoid some of the most frustrating aspects of market makers, such as delays due to liquidity and expensive re-quotes, ECN brokers are the best choice. These are some of the main reasons for the rising popularity of ECN brokers in recent years.
Who Is An ECN Broker?
Why Is ECN So Popular?
Pros Of ECN Brokers
Cons Of Forex Brokers
There are numerous benefits for traders to use ECN brokers if it’s done properly. If you are willing to cut out the middleman from your trading, it would be a good idea to consider a brokerage that offers a comprehensive ECN system as a part of their service offerings. However, before you do so, make sure you go through this comprehensive guide on ECN brokers.
In simple words, ECN is a network that brings together various market participants under one platform enabling them to buy and purchase forex with each other. ECN brokers offer automated and algorithmic networks for traders to have direct access to the forex market. There is no dealing desk involved. Thus the traders can directly participate in the market to search for the best buy and sell prices. Many brokers are market makers and charge a “spread” in exchange for the services offered (such as facilitating forex trades). However, when you use an ECN broker, you pay a low spread. Often, you don’t have to pay anything at all with an ECN broker. The reason is that ECN brokers directly publish orders entered by numerous market participants to individual traders as well as third parties. Such orders can then be executed automatically through an algorithm that can match the buy and sell orders at the best available price in the market.
Thus, ECN has broken the barrier for traders to access the forex market by efficiently bringing traders (both individual and institutional) and liquidity providers in the same place.
One can name numerous reasons for the popularity of ECN brokers among traders. Certain types of traders don’t agree with the forex spread system because it enables the market makers to fix their prices independently. They see this pricing policy as rather non-competitive, which puts them at a disadvantage. In addition, spreads are hardly ever transparent, meaning it’s not clear why traders are being forced to harbour certain spreads. At the same time, ECN brokers offer a highly competitive and fair pricing system where buy and sell prices are determined through an auction.
Additionally, an ECN broker never takes a position against the trader, something which is a regular practice for standard brokers. Hence, if you want to avoid some of the most frustrating aspects of market makers, such as delays due to liquidity and expensive re-quotes, ECN brokers are the best choice. These are some of the main reasons for the rising popularity of ECN brokers in recent years.