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Forex Traders Should Start Embracing Ethical Investing Practices

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Ethical investing is becoming a lot more important for people all over the world. The amount of money kept in sustainable mutual funds and ESG funds increased 53% over the past year.

Most discussions about ethical investing focus on stocks and bonds. However, other types of investors also need to think about ways to help support ethical trading practices. Forex traders are among them.

There are different ways to practice ethical investing as a forex trader. Most of the discussion will center around finding more environmentally friendly ways to trade currencies. However, other ethical practices are also important.

Getting Started as an Ethical Forex Trader

When starting to get into forex trading, it is important to make sure you consider ethics. Trading is not just about making a profit; market participants do not want to feel that their interests are not taken into account – it is necessary to make sure that the market has virtue and integrity. It is up to those involved in trading to make sure that the markets are functioning in both an ethical and trustworthy manner.

Forex traders can learn from some legendary ethical investors. They can also apply the time-tested practices listed below.

Avoiding Exploitation from Banking Institutions

Banks can be seen as having information on large foreign exchange dealings. The issue with this can be the potential for banks as well as their employees to utilize any knowledge of the activities of their clients with the intention of benefiting themselves. This leaves the client’s interests as being put aside and essentially ignored. Another issue that can be found with banks that may be operating unethically is their ability to operate a speculative forex section – this will profit the bank as they will have access to insider information about speculative activities as well as other parties’ commercial activities.

Backing Down from Unnamed Trading

It is important to ensure that there is a clear distinction between any confidential trading; alongside this, it is also important to ensure there is a distinction between any anonymous and unwise trading. You might be wondering what exactly this means for yourself as a forex trader. It is necessary to allow credit personnel, compliance, and legal to receive any and all information that may be required if there is the need to assess counterparty risk. This is most beneficial for a forex trader as it allows for a client’s identity to remain anonymous to the front office.

The Forex Market

Currently, a central regulatory body does not exist; instead of this, the forex market can be seen as being regulated by bodies established at local levels – these are often international and exist across the world. Each local body will follow the laws that govern their jurisdictions. Any forex traders should know that any and all regulatory bodies that are established in the EU have the ability to operate in all countries in Europe.

All regulating bodies have many responsibilities, such as conducting periodic audit reviews. They will also be responsible for inspecting customer related, financial as well as legal activities of a forex market trader. Regulating bodies also ensure that brokers are abiding by ethical rules. There are consequences when the guidelines are not met – a broker may end up being punished by a regulating body.

Guidelines For Forex Trading

One document that is recommended for any forex traders who are looking to ensure they are trading ethically is the ‘Guidelines for Foreign Exchange trading Activities.’ This is a document that has the intention of providing a set of practices that will allow forex traders to understand what is and isn’t permitted in the forex trading world. The document has the aim of promoting transparency and market efficiencies so as to enable educated decision-making. It is important as a forex trader to make sure you are keeping yourself informed about any new and changing guidelines.

Regulating Forex

Although there has been an attempt to introduce and enforce ethical behavior by forex market forces, there is still no proper regulation of the forex market. The enforcement of ethical behavior in forex ensures that any unprofessional practices are made known among any market participants. The consequences of any unprofessional practices can result in sanctions.

Many banks and broker-dealers have been regulated to ensure that any forex trading can remain as ethical as possible. Any forex activities will be subject to review – any problematic practices may have the possibility of resulting in a penalty.

Management for Forex Trading

Another document that is recommended for any forex traders looking to trade more ethically is called the ‘Management of Operational Risk in Foreign Exchange’ – this is a document that informs traders of around 60 of the best trading practices. Forex trading initially was done through high-street banks mainly whereas now it is mostly done by investment and commercial banks.

Ethical Investing Strategies Should be the Basis of Modern Forex Trading

Forex traders need to find new ways to be more ethical. The guidelines listed above will help them meet this goal while still increasing their profits.

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