Community Forex Questions
What is churning?
A broker typically earns a portion of the commissions or other fees earned by the brokerage firm on each purchase or sale of securities made for an investor. When a broker engages in excessive buying and selling (i.e., trading) of securities in a customer's account without regard for the customer's investment goals and solely to generate commissions for the broker, the broker may be engaging in churning, an illegal practice.
Churning is an unethical practice in financial services where a broker excessively trades a client's account to generate commissions, disregarding the client's best interests. This practice often involves frequent buying and selling of securities, resulting in high transaction costs that erode the client’s investment returns.

In forex or stock trading, churning can occur when a broker prioritizes commission income over the client's portfolio growth. It is illegal under most financial regulations, including the U.S. Securities and Exchange Commission (SEC) rules.

Signs of churning include unusually high trade volumes or frequent transactions with no clear investment strategy. To prevent this, investors should monitor account activity, understand commission structures, and work with reputable brokers. Reporting suspicious activity to regulatory authorities is crucial to safeguard investments.

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