Every day, more than $4 trillion is accounted in traded value in the world’s largest financial market, the foreign exchange market. It is currently growing without a central place for itself and with a Forex brokers increasing number indeed. The wide brokers’ offer might be challenging for traders.
Choosing the best broker to direct a trading activity becomes a difficult task. Traders must examine consciously and carefully the Forex market among stunning magazines and mind-blowing web advertisements to find out the indicated Forex broker that can manage successfully the trading activity. Here, five must-dos are given as guidance on how to chose Forex broker question, to those who want to select the right Forex trader in this competitive environment.
How to Choose Forex Broker: Governmental Subscriptions
In The United States, Forex trading activity is under the regulations of the National Futures Association (NFA). This is a self-regulatory and wide industry that rules, programs and develops services in order to assure the soundness of the market, traders, investors and, their right understanding of the binding responsibilities. Additionally to this industry, the US Commodity Futures Trading Association also works as an independent governmental agency that controls the prospective goods and options of the American market.
Therefore, a trustworthy Forex broker is registered in the aforementioned organizations as a Futures Commission Merchant and Retail Foreign Exchange Dealer. In fact, the certified broker will portray his/her affiliation and NFA member number online in the About Us section of every site.
Don’t let yourself to be dazzled by good-looking pages! Check brokers’ NFA membership or CFTC regulation before you choose Forex broker.
Check out the list of the best Forex brokers and their reviews
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Choosing Forex Broker: Details Matters
Certain offers are given to brokers, such as:
Leverage and Margin, Leverage operates in benefit of winner traders due to their high profit potential increased. It also offers a loan boosted according to the margin of holders account, so traders have access to several Leverage amounts depending on the broker, such as 50:1 or 200:1. That means that a trader with an account with $1,000 can hold a position valued in $50,000 only by using 50:1 leverage amount. But be cautious when using it! As it can be seen in the article Forex Leverage: a Doubled-Edge Sword and Adding Leverage to your Forex Trading, leverage might work in favor of traders, but it can ruin them according to their amplified losses potential at the same time.
Commissions and Spreads, Commissions and spreads represent a source of money for brokers. Commissions can be charged of a specific percentage of the spread (bind and price difference of a Forex pair). Many brokers exonerate commissions and profit with wider spreads. This last can be shown when a spread is fixed as a spread of three pips – the minimum unit of Forex change price -, or when a spread price varies depending on the market volatility.
For example, if a 1.3943-1.3946 EUR/USD quote has three pips spread and bought at 1.346, it will lose three pips of value in its position because it is not sold for the initial price, 1.3943 pips. Most common trading pairs – EUR/USD and GBP/USD – usually have narrow spreads than those with more scantly traded pairs. The wider the spread, the harder the profit. Take this into consideration when comparing FX brokers.
How to Choose FX Broker? Deposits and Withdrawals
One of the most attractive features to newbie traders and investors is the purchasing power: it is bigger than the minimum traders’ deposits. So, brokers can offer a variety of accounts depending on the initial deposits requirements, among them standard, mini and micro accounts. These can be funded with very low initial deposits, less than $50.
Forex Brokers have policies regarding account withdrawals and funding. Withdrawals can be done by checks or wire transfer; and, accounts might be funded online by credit card, via ACH payment or PayPal, wire transfer, and business, personal or bank check. Brokers can also charge optionally a fee for any service provided.
The right pair offer
Brokers can offer traders a broad selection of Forex pairs despite the great currency issues available for trading. Their offer should match with the pair(s) in which the trader or investor shows interest into. However, a wide range is reduced to few currencies as they get the whole attention of traders due to their enormous liquidity. The favorite ones are the Dollar/Japanese Yen (USD/JPY), the Euro/US dollar (EUR/USD), the US Dollar/Swiss Franc (USD/CHF), and the British Pound/USD Dollar (GBP/USD). Remember, if you choose broker that does not offer your favorite pair, you will miss great part of your profits.
Choosing FX Broker: Unstoppable Service
Brokers support should be available to client as Forex trading is happening: 24 hours per day. Personal calling to brokers should be simple and easy. Therefore, traders can take a quick glimpse of the service provided, the waiting times, and the representative’s accuracy to be inquired about spreads, leverage, regulations and, especially, company details. Brokers can be also asked about the size of their’ traded volume -better prices and executions are given to those experienced brokers normally; and, the time practicing their job.
The Best Trading Platform
A trading platform is an investor’s portal to the market that must provoke enthusiasm and have linkage with traders. The easiness of the interface and software chosen must be taken into account as well as its amiable presentation and technical/ fundamentals analysis tools’ completeness. Also, the platform design is a must to care: In contrast with poor designed interfaces, a well arranged trading platform has well placed buy and sell buttons, customization options, order entry types, automated trading options, strategy builders, back testing, trading alerts and, a panic button to close all open positions – only some software include this option – in order to avoid costly mistakes like adding a position by accident instead of closing it or going short when the opposite is desired.
Most brokers offer a free demo account, so traders can explore the platform before opening and funding one.
Doing a bit of research before committing a broker it is beneficial and advisable. It can increase investors’ possibilities to succeed in this aggressive environment. As a final remark: relying on your forex broker will be advantageous since more time and attention can be dedicated to the analysis and the creation of strategies.
If you are interest to trade like a pro, Investopedia introduces a guide to teach you how to do it: Five patterns you need to know.
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