Forex traders would understand that trading has a positive side. As much as it is a way of earning a living, it is also a way to earn the money you desire. However, the risks involved may not always yield something positive. Risks can both increase your profits or amplify your losses.
As a safety mechanism against trading risks, segregated accounts are much needed. One of the best forex brokers, Tradesto says that traders who are concerned for their money and their investments going in the right direction, segregated accounts become crucial.
Defining a Segregated Account
A very basic definition of a segregated account means that it is a separate account for a client and a company's funds. So, when you hire a forex broker who gives you such an option, your funds will be put in a separate account. It can be controlled but cannot be used by the broker for investing or even for recovering losses.
Understanding Whether You Need a Segregated Account and Why
When you own a segregated account, you are able to protect your funds. With such an account, even when bankruptcy occurs, you can lose your funds but you will receive refunds, adds Tradesto.
You may be thinking that every broker ought to give you a separate account to separately manage your funds and the company's funds. However, it is not so with every broker. In the case of some forex traders, they deposited funds in their accounts. These funds ended up getting mixed with the company funds of the broker. When hardships occurred on that broker's company, these funds were used for coming out of financial debts.
Surely, you wouldn't want to land in a situation like this one. This is where a segregated account can save you. Your funds will never get mixed or be used by the broker for reducing the company's debts, if any.
To Sum up
A segregated account is an excellent safety mechanism. It keeps your funds protected and prevents them from getting mixed with the company's funds. Opting for this account will be a smart decision. For more info, check Tradesto Review