How to successfully choose a forex broker
For beginner traders, the main question that first pops up on
their mind is how to choose a reputable and trustworthy broker of their choice?
If you’re new to trading in the Forex market, selecting the right broker can be
an overwhelming process. And hopping from one broker to another may be
detrimental to your trading success considering the speed at which the market
Many brokers portray themselves what they are not – industry leading, world’s leading, low spread broker. The reason stems from the fact that the astronomical surge in forex trading activity over the years has driven the competition with each broker advertising their advantages over other brokers.
Before delving further, the question most folks ask is:
Can you trade without A broker?
To successfully trade in this thriving market, you need to have someone experienced – a kind of mentor – to help you make the right decisions at the right time, especially when you’re new.
On your own, you will have to intensify efforts to become successful in the Forex market by engaging in self-paced study to understand the fundamentals of trading.
Reputable broker regulation
The most important thing in choosing a broker is whether they are registered with a licensed and competent authority. If so, do they comply with the rules set in place by a regulatory body or not? For example, in the US, Forex brokers have to be a member of the National Futures Associations that authenticates and regulates industry-wide trading.
They should register with the US Commodity Futures Trading Commission as a Futures Commission Merchant and Retail Foreign Exchange Dealer.
In Europe, they should register with the Financial Conduct Authority (FCA), the Cyprus Security and Exchange Commissions (CySEC) among other reputable authorities.
With the authorities and compliance in place, rest assured that all disputes that arise from trading would be sorted out amicably.
Above all, you will not fall prey to any kind of brokerage scam since any dispute with a regulated broker will be reported and dealt with appropriately.
When you’re in a broker’s website, browse about us page and find information about the regulation. Please do not fall prey to enticing bonuses and glamorous support images or flash banners on the site.
Another important factor to watch out for when selecting a Forex broker is capitalization. No broker would succeed without proper capitalization. It can be risky to hold your funds with a firm that is undercapitalized.
Adequate capitalisation ensures competitive pricing and enhanced credit relationships with liquidity providers that eventually benefit you as a client.
When assessing capitalization, make sure the firm complies with minimum capitalisation requirement.
Practicing with a demo account?
Do they offer unrestricted demo trading? It is highly beneficial to have unencumbered demo trading access because practice makes perfect. You will need to practice in a demo environment, test your strategies and do some comparison with your demo account before deciding to trade for real. The demo trading is faster than the real environment so is a huge advantage to gauge the execution speed of the platform.
Market maker or a straight -through processing broker
There is a huge controversy in the forex industry in this topic and for every novice trader, please pay particular attention to it. With MT4 broker you can rest assured that the broker is using STP execution as this is the only execution that is supported on MT4. The reason stems from the fact that it is widely used than other types of platform.
A market maker is the first type of broker that facilitates trade between two parties and pockets the spread of the trade, which is their fee for facilitating the trade. When necessary they can take the other side of the trade.
The other type of broker is the Electronic Communications Network. As the name suggests, electronically allows traders to match orders.Trading platform
There are many options when it comes to choosing a trading platform but what you should consider about the platform is its ease of use, features, and visual appeal. Is the platform mobile, downloadable or web-based? Do they offer mobile trading platforms or app to trade while on the go?
Your platform is your market portal, and if you want to trade swiftly, you need to make sure you are comfortable using the software. A key feature to look out for in the trading platform is clear “buy” and “sell” buttons. Using a poorly designed interface can lead to costly mistakes and issues with placing orders. Look for a free demo account with your preferred broker to find out whether the platform is easy to use or not.
Efficient customer service
It might seem obvious but it is of paramount importance that you determine beforehand, the kind of customer service the broker offers. If you’re unable to reach them at a crucial point in decision making or you want quick advice, there really is no point of engaging with such a broker. Look for clear and multiple routes to contact the broker. Should you run into any issues, your broker should be able to help you instantly rather than putting you on hold or disappearing.
Brokers offer different types of trading accounts, typically varying by minimum trading size allowing you to choose an account that matches your capital. The typical accounts offered by the broker are mini, micro, or standard accounts. A standard lot consist of 100,000 units, a mini lot consist of 10,000 units, and micro lots consist of 1000 units. You can also establish your own position size by fraction unit sizes, which some brokers offer. However, initially it might all seem confusing but as you gain more understanding things would start to become clearer.
Sniping or hunting
Although these are sometimes sponsored but there a few genuine comments which I believe you’ve got eye to spot them. Put the brand name on Google search bar and look for reputable comments on BabyPips, Reddit, Forexfactory and other top forex blogs. You need to spend some time in doing this to get the desired results. After this exercise you will objectively take a decision that will suit you the best.
Tips to filter good and bad Reviews
While you’re searching for the best Forex broker you will come across countless reviews both good and bad. Here are some tips to filtering them out: Who posted the review? When did he sign up for the forum? And how often does he make posts? Does he have followers and have any merit on his status.
Strict margin rules
Brokers have a say in how much risk you can take when trading with borrowed money. However, they can also buy or sell on their own which could pose a problem. Brokers with strict margin rules can cost you because even if you have enough cash to cover a dive in your position before it reaches a high, the broker can liquidate your position at that low. So always, check the margin rules.
If you’re a novice in Forex trading, the apparent labyrinth might confuse you in the beginning, but the best way to get a head start is to consult your trading friends. You can also seek recommendations from them on the best Forex broker to choose from. However, do keep in mind that everyone has different preferences.
Don’t just assume that a particular Forex broker would be> good because they have a nice website; do your research well and check for credibility before choosing them.