Why do Forex brokers go bankrupt?

In order to trade professionally on the Forex market, you have to use intermediaries called Forex brokers when opening transactions.

This type of company does not guarantee the protection of your deposits as traditional banks do, so in the event of bankruptcy, you will lose all your money.

The broker refuses to fulfill its obligations to clients, and as a rule, traders' accounts are first frozen, and then the company ceases operations altogether.

That's why it's so important to understand why brokers go bankrupt, so you don't make mistakes and trust your money to the wrong company.

Let's start with the fact that it is mainly brokers who do not bring transactions to the interbank market and provide them themselves who go bankrupt liquidity.

Reasons for Forex company bankruptcy

The main reason brokers go bankrupt is the massive and urgent withdrawal of funds by clients. As a result, the broker simply lacks sufficient funds to cover all obligations.

The large number of applications increases the time it takes to process them, which in turn provokes even more panic.

If the company is simply acting as an intermediary, it will only need time to return all client funds. However, when trading is not entirely fair and the broker manages client funds at its own discretion, this may be the reason for refusing payments.

The main factor here is the news that triggered the trial – accusations of fraud, license revocation, and the bankruptcy of partners providing liquidity.

How to protect yourself from broker bankruptcy?

There are several ways to help reduce the likelihood of losing your equity:

• Working with ECN brokers – companies do not interfere with clients’ trading, but only transmit orders - https://time-forex.com/vsebrokery/ecn-brokery

• Segregated account – will completely protect your money since they are in a bank account, and only serve as collateral for opened transactions, and are not transferred to the broker - https://time-forex.com/vsebrokery/segregirovannyy-schet unfortunately, such accounts are very rare, but they still exist.

• Bankruptcy insurance – allows you to receive compensation of up to 20,000 euros in the event of a broker’s bankruptcy. List of insured brokers – https://time-forex.com/vsebrokery/zastrahovany-broker

Broker bankruptcies are quite rare these days, but it's still best to be prepared for such an eventuality, as getting your money back is practically impossible.