You can surely earn a lot from the foreign exchange market. If done properly, you can expect to have a nice payday from trading currencies. However, before you can do that, you’ll have to find a forex trading broker.
Essentially, your forex trading broker is your first major investment. And when choosing a forex trading broker, you must be careful. Being careful means having criteria that the forex trading broker should meet.
There are many things to consider when choosing a forex trading broker. Nonetheless, there are some basic things you should look for. And we’ve listed them down below. Try and find these qualities from the forex trading broker you plan to work with.
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This is perhaps the most crucial thing to look for on a forex trading broker. You have to find out if the broker is regulated or not. And if they are, check how.
You will hand them your hard-earned money. They’ll be the ones to handle your money for you and you’re going to pay them one way or another.
The good thing is that it’s not difficult to check if the forex trading broker is under any regulation. Around the world, you can find major regulatory agencies. The forex trading broker should be regulated under these agencies, depending on their location.
If the forex trading broker is in the United States, it must follow the National Future Association and Commodity Futures Trading Commission. If it’s in the United Kingdom, it should fall under the Financial Conduct Authority and Prudential Regulation Authority.
In Australia, they have the Australian Securities and Investment Commission. Switzerland has its Swiss Federal Banking Commission. Germany has Bundesanstalt für Finanzdienstleistungsaufsicht, while France has Autorité des Marchés Financiers.
Before you make a deal with the forex trading broker, check if it falls under any of these regulatory bodies.
Trading Platform and Website
Most of your trading activities will take place on the forex trading broker’s platform and website. It’s just right to expect a functional platform and website.
The platform should have all the functions and features that will help you easily navigate and place orders/execute trades. It should also be straightforward and not confusing. If you’re using a website that’s difficult to navigate and access, you’re more likely to get distracted.
Deciding whether a website is good is a subjective matter. There are some questions you can ask when checking a platform or a website. For one, see if the website crashes a lot. Does look professional enough? Does it offer free news updates and market commentaries? Are there technical analysis and trading tools? Can you find all the information you need to trade properly?
Spreads are another very important aspect to check when finding an ideal forex trading broker. The spread refers to the difference between the bid and ask price of a currency pair. Remember that you’ll always trade in pairs.
The only thing you have to remember is that the spread should be not higher than 5 pips for major currencies. If you’re not yet familiar with the majors, they are EUR/USD, GBP/USD, USD/JPY, USD/CHF, and USD/CAD.
Costs, Fees, and Commission
No matter which currency pair you choose, you’ll always have to shoulder some costs and fees. In fact, you’ll have to pay some amount in any market, whether its stocks, commodities, real estate, or alternative investments.
Every time you trade, you will have to pay either the spread or a commission. What you have to do is to find a forex trading broker that charges reasonable prices.
It’s just fine to look for the cheapest broker around. But remember that sometimes low costs imply relatively lower qualities, though an expensive one doesn’t always equate to high quality.
The fix to this is to find the correct balance between low transaction costs and security.
Deposit and Withdrawal
This is very basic. A good forex trading broker allows you to deposit and withdraw money without a fuss. Though some brokers have policies or terms that make it a little more difficult to withdraw funds, there’s really no reason for them to withhold your money aside from facilitating trades.
Make sure that the broker’s terms and conditions for deposits and withdrawals are clear. Read them carefully and ask situational questions if you must. This can give you a better idea how the broker handles customers’ cash.
Customer support is one of the most important things that a forex trading broker should have. Poor customer support can lead to delays, therefore frustrations. Worse, it may even lead to huge losses in actual money.
Make sure that the broker has efficient and reliable customer support. The customer support team should all be prepared for any kind of situation. Delays should not happen often. Also, the people you talk to should be patient when it comes to explaining matters.
There will always be confusions and instances where you won’t know what to do. And the very first people you’ll ask help from are those from customer support.
In order to check the efficiency of the forex trading broker’s customer support, you can use some simple ways. You can send some emails, calls, or messages to their online representatives. Ask a lot of questions. If you’re not satisfied with their answers and responses, maybe try out another forex trading broker.
Fast Response Time
Related to customer support, this one refers to the speed at which your orders, questions, and requests are answered. What’s important is that they respond promptly, minimizing risks of possible losses. The forex trading broker should be able fulfill your request for a opening or closing a position, for example.
In order to verify this, open a demo account and try paper trading with them. This is in fact one of the most important things to do when starting out.
Keep in mind that the speed of the demo account is typically different from that of a real account. Nonetheless, using a demo account can give you a feel of the inner workings of the forex trading broker.
Leverage is a double-edged blade. This means that you can earn huge amounts if you use them properly. But you can also suffer great losses if you misuse it.
Leverage is very attractive for many retail traders so almost all brokerages offer it. They can offer leverages as low as 50:1 to as high as 400:1. It lets you control a larger amount of securities with proportionately smaller amount of upfront capital.
Remember that a good broker will tell you the risks and dangers of using leverage. They may promote it, but keep in mind that you’ll be the one to suffer if the trade fails. And they will still be the one to gain.
Remember that it’s mandatory to get your broker fill you at the best possible price for your orders. Your broker should fill you at or close to the market price, especially under normal market conditions. Normal market conditions refer to normal liquidity, lack of important news, and lack of surprise events.
This is very important since a few pips difference can make it hard for you to win a trade.
As suggested, brokers can still make money from you even if you lose. Therefore, it’s possible for them to not warn you of the risks you take.
A good broker should warn you about the risks and dangers of every trade you make. Even if it’s also your job to assess your risk tolerance, they should still remind you. It’s part of professionalism. Even so, remember that you can still use some risk management tactics to avoid losses.
Forex Trading Broker: Conclusion
Finding the right broker is one of the first investment decisions you will make. Again, the broker you choose is your first major investment. So make sure that you find those qualities above in your prospect. This will help you become more successful in your trading journey.
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