As a forex trader, there are few things that af your success more than your choice of a forex broker. However, the retail forex market is so competitive that going through the available brokers to select the best ones is capable of giving you a headache. Before we examine five crucial factors to be considered when looking for a broker, let’s find who exactly is a broker and why they are important.
A forex broker is a financial service company that gives traders access to a platform for buying and selling currencies. A forex trader is the intermediary that allows retail traders like you to trade forex.
As you know, the forex market is a global 24-hour market. Retail forex traders use the platforms created by brokers to speculate on the direction that currencies will move. Some brokers also have large financial services firms that trade on behalf of banks as their customers.
With a forex broker, a trader opens a trade by buying a currency pair and closes the trade sometime in the future by selling the same pair.
Now that you know who a forex broker is, how do you select the best one? What are the criteria that you’ll use to select a broker?
The first and most important thing that a good broker must have is high-level security. You are going to be investing thousands of dollars into your forex account, after all, and it makes sense to ensure that the party that you’re investing with is actually legit.
Checking how credible a forex broker is actually quite simple. There are regulatory agencies worldwide that separate trustworthy brokers from fraudulent ones.
This is a list of the corresponding regulatory agencies for forex brokers in various countries:
If you reside in any of these countries, before you even think about opening an account with a broker, ensure that they are registered members of the regulatory bodies listed above.
Irrespective of the kind of trader you are, you’ll always be subject to transaction costs. Every time you enter a trade, you have to either pay for a spread or commission. Due to this, it is natural to seek the cheapest possible broker, however, that is not always the wisest decision.
You might need to sacrifice cheaper transaction costs to get a more reliable broker. ensure. Find out if you need tight spreads for the type of trading you do, and then review the broker options available to you. It’s all about finding the right balance between security and low transaction costs.
Another quality that you want to look out for in a forex broker is the ability to deposit funds into your accounts and withdraw your earnings without any struggle. The only reason why a broker should hold your funds is to facilitate trading, so you should be able to withdraw quickly and easily. You want to be sure that you get a broker that does not withhold your funds unnecessarily. Also, check to ensure that there are multiple withdrawal channels. You don’t want a situation where there’s only one withdrawal method and you get stuck with that.
In the world of retail forex trading, most of the trading is done via the broker’s trading platform. This means that your selected broker must have a trading platform that is easy to navigate and use. When looking for your broker, you should check what their trading platform has to offer.
Does the platform provide financial news? Are there technical and charting tools that are easy to use? Does it provide you with all the information that’s needed to trade effectively?
The answers to these questions will determine if you should choose to trade with a specific broker or not.
For you to trade effectively, your broker needs to fill you at the best possible price for your orders. This means that when you place a trade at a particular price point, the order should get filled in at the price or within micro-pips of it. For example, if you place a buy order on EUR/USD at 1.3500, your entry point should be 1.3500 as long as market conditions are normal and you have a stable internet connection. This is important if you are scalping because your orders getting delayed might mean you miss a few pips of profit, which can affect your profits.
The choice of a forex trader is one that can make or mar your trading experience and can mean the difference between profits and losses on your account. Thankfully, these tips should help you avoid bad brokers and work with only good ones. You can check our list of recommended brokers here.