Ready to start trading currencies? If you think so, then it’s time to choose your forex broker. This is a crucial part of establishing your journey and making a sustainable profit. Using the wrong broker can result in financial loss.
Being the largest market in the world, the number of forex brokers is growing faster than ever. Having a huge selection to choose from is a good thing, but the large number of available brokers can be difficult for a new trader such as you.
The decision of which brokers to choose is really important. Your broker is one of the factors that will determine your success or failure in your journey.
In this chapter, we’ll help you find the qualities you should look for when choosing a forex broker.
Your utmost priority is to do a research with the goal of knowing if a broker has a solid reputation and if they are able to meet your needs.
Furthermore, the majority of forex brokers allow you to test their services with a forex demo account. This way, you’ll gain a good understanding of what the system is actually like. It’s a smart way to test out as many platforms as you can before deciding which broker to use.
Of course, you wouldn’t want to put your thousands of dollars to a company who simply claims they’re legit. What you need is a high level of security, and it’s the number one factor you should look into. And you can find out by checking the credibility of a forex broker.
There are global regulatory agencies that help separate the legitimate from the fraudulent.
- United States – National Futures Association (NFA), Commodity Futures Trading Commission (CFTC)
- United Kingdom – Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA)
- Australia – Australian Securities and Investment Commission (ASIC)
- Switzerland – Swiss Federal Banking Commission (SFBC)
- German y – Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
- France – Autorité des Marchés Financiers (AMF)
- Canada – Autorité des Marchés Financiers (AMF)
To see the complete list of Forex regulatory and supervisory bodies for each country, click here: https://www.100forexbrokers.com/forex-regulation
Proper regulations help you to see if your broker is well capitalized. This applies in the event of trading losses, keeps your funds in secure and segregated accounts, and maintains fair dealing practices. We strongly recommend that you choose a regulated broker with clean records.
Forex Trading Platforms
The trading platform is your portal to the forex market. And the platform of your broker must have the features of being user-friendly and stability.
Therefore, it should be easy to use, visually pleasing, has various technical and fundamental analysis tools, and that trades are entered and exited with ease.
On the other hand, a badly made interface can result to costly order entry mistakes. One good example is accidentally adding to a position instead of closing it, or going short when you need to go long.
Fortunately, most brokers off free demo accounts so that you can try out the trading platform before opening and adding funds to your account.
A good broker must fill you at the best possible prices for your trades.
Such that there are no important news release, surprise events, or normal liquidity, your broker should fill you at, or close to, the market price you see when clicking the buy or sell button. In addition, it is critical to verify that when making a request, it should be fulfilled with a minimal delay.
For instance, let’s say you have a stable internet connection, if you buy EUR/USD for 1.1686, you should get it at the price or within micro-pips of it. This is most important especially if you’re a scalper. With just a few pips in difference in price can make that much difficult on you to win that trade.
Costs and Fees
Every time you enter a trade, you have to pay for either a spread or a commission. That’s why it’s only natural for you to get the most affordable rates.
The spreads are brokers’ main source of compensation. The tighter the spreads, the less cost it is for you to enter and exit a trade.
Additionally, spreads vary with each currency pair and tend to be tighter for high volume pairs. Spreads should not be larger than 5 pips for the major currencies.
Brokers will always have a problem and you can’t avoid that. No matter how perfect they are, they still have their flaws. Therefore, you should choose a broker that you could easily contact when issues arise.
Before opening an account with your chosen broker, test out its customer support through e-mail, telephone, or chat. If you don’t get the response you expected, maybe you have to move on to the next broker.
Forex Trading Demo Account
The most effective way to test and verify the broker you chose is to open a forex trading demo. It is something you should do anyway to improve your skills and strategies.
However, it’s not the perfect method to test your broker due to the fact that the speed of a demo is different than a real account. Still, this can give you the best way to check the tools of your chosen broker.
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