When you start trading forex, it’s vital that you select the best forex broker. You may be overwhelmed by choices and not know which one to choose, where to begin or what is important. A broker is actually an important part of your trading and can mean the difference between profits and losses.
Below are the top 10 tips for choosing the best and trusted Forex broker for beginners and Professional Trader
This is the first thing to check before choosing a trusted forex broker. Of course, no one would want to trade with “Forex scams”. This is why it’s vital to check if the broker you have selected is a registered with the right regulating authorities. Research online or visit their website to find out if they are registered with the right forex regulating authorities such as National Futures Association ( NFA) and Commodities Futures Trading Commission (CFTC) if they’re situated in the US or The Financial Conduct Authority (FCA) if the broker is located in the UK.
If the broker is licensed to conduct business, this means that they’re expected to meet the set standards and the right capital requirements all the time. The truth is, online Forex forums are full of horror stories of Forex traders who registered with unregulated or unlicensed brokers and their money disappeared. You really don’t want to become a victim of these scams, do you?
When choosing a broker, another important factor to consider is transparency, and there is a good reason for doing this. A Forex broker who is transparent should be forthcoming about all the procedures. They should also disclose clear metrics about all their operations and should not behave as if there is something to hide.
Before you sign up with a particular Forex broker, it would be wise to ask them about other transaction costs, including deposit and withdrawal fees. A number of Forex brokers today regularly publish their trading volumes, execution statistics and other details which may be useful to you. These details are vital if you want to get a clear idea of the broker’s operations before registering with them.
Leverage is very important in trading Forex. In fact, it’s one of the main reasons to trade currencies at all. It means that you can trade with more money than you actually have. To do this, you need a broker that has a favorable leverage ratio. Some brokers will have a 1:1 ratio, which means if you have $100, you can only invest $100. I’ve seen the ratio go as high at 1:400, which means with $100, you can trade with up to $40,000. That’s a big difference. However, leverage has its cost. Frequently there are fees and interest to be paid while you are leveraged. Find a Forex broker that has the right ratio and the right costs for you.
4. Deposit and Withdrawal
A good Forex broker will have a platform that allows you to deposit money and withdraw your profits hassle-free. A licensed and reliable broker shouldn’t make it hard for you to withdraw your earnings. The only reason they can hold your earnings is to facilitate trading. Note that a broker may hold your funds to make trading easier so there’s no reason for their clients to have a hard time accessing the profits they have earned. Also when choosing a broker, check if their deposit and payments methods are convenient for you. The deposit and withdrawal process should also be speedy and smooth.
5. Trading Platform
In online Forex trading, almost all the trading activity will happen through the brokers’ trading software or platform. This implies that the broker’s trading platform must be stable and user-friendly.
When in search of a Forex broker, make sure that you always check what their trading platform is offering. Does it provide free news feed? Does it provide easy-to-use charting and technical tools? Also, check whether the platform presents you with all the essential information you’ll need to execute your trades properly.
As a trader, you don’t pay your broker any money for their services since they’re usually compensated through Spreads when you start trading. Spreads are usually collected during the trading by your broker whether you are in profit or loss. Generally, spreads couldbe as high as 10 pips or as low as 1 pip, depending on your broker. So, it is important to check if your broker operates huge Spreads on their clients’ accounts. Ideally, a broker with Spreads of 2 pips or below is perfect for a beginner.
7. Currency Pairs Offered
While there are many currencies you can choose for trading, only a few of them get much attention and therefore trade with the highest liquidity. The majors include the U.S. dollar/Japanese yen, the Euro/U.S. dollar, the U.S. dollar/Swiss franc and the British pound/U.S. dollar. A broker might offer a wide selection of currency pairs, but what’s more important is if they offer the currency pair(s) which investors are interested in.
Another factor you must check when choosing a broker is the level of security they offer. If you really want to know whether you will ever see your deposited funds or earnings, then choosing a broker who offers a high level of fund safety is mandatory. Note that fund safety is associated with whether the broker is regulated or not. Reputable and regulated brokers usually keep customers funds in major banks. Such brokers are insured to make sure that that your money is safe, should a disaster strike.
9. Stop Loss Protection
The main reason why you have invested in Forex is to make profits, not to lose. So, you’d want a broker who platforms has stop-loss protection. This is an essential feature that ensures that your losses don’t exceed certain amount. Most brokers today offer this feature, but it’s still necessary to confirm with the broker you’ve chosen before opening an account.
10. Customer Support
The last essential factor to check is customer support. Forex trading takes place 24/7. How fast is their support? It sucks to have a technical problem during your trading hours, only to have to wait long for a solution. Check their response time. Do they offer support in several languages? Most of the world speaks English, but sometimes it’s easier to explain yourself in your own language.
To wrap up, there are several things one must do before they become a successful and professional Forex trader, but the most important of all is finding a reliable broker. The above tips will help you in doing just that.