You need to determine the regulating agencies that exercise authority over the broker. Essentially, the Forex market is an unregulated market. Reactive regulation is the typical practice. This means that you will only get action after you lose your entire savings.
Forex brokers in the United States should be registered as a Futures Commission Merchant. The Commodity Futures Trading Commission exercise regulatory powers over them. The brokers should also be a member of the NFA. These agencies were created to protect you from abusive trading practices, fraud, and manipulation.
You will be able to verify the status of the Forex brokers with the Commodity Futures Trading Commission and NFA. Registration of a broker as well as its membership can be checked by phoning the NFA at (800) 621-3570. You can also visit the NFA web site at www.nfa.futures.org/basicnet/. Here you can find basic information about the broker and its history of disciplinary actions.
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