As the popularity of online trading continues to grow dramatically thanks to the advent of the internet and increased accessibility to the online trading environment, the number of forex brokers in the industry has grown substantially. This has given the modern-day trader the advantage of having a vast choice of brokers to choose from. The problem, of course, is that with so many options available, it can also be rather confusing, not just for new traders, but for more experienced ones too.
Choosing a forex broker is a very important decision that every forex trader has to make. This decision must be made in an objective way, ideally examining the pros and cons of each broker. It is not always an easy task, not least because there are so many brokers out there, but also because the huge range of services offered can make it seem like a daunting task.
However, signing up with a broker without properly assessing their background and expertise is highly risky. There are many aspects of a broker’s operations that should be considered prior to opening an account as well as a whole host of other factors that should be considered when choosing a forex broker. Here are our top 5 tips.
Make Sure You Trade With A Regulated Broker
Choosing a regulated forex broker is of utmost importance as it means a trader is protected in the event of a dispute. A broker that is certified and regulated in a country with an advanced legal framework, such as CySEC, means that traders are protected against fraud. A slick looking website does not on its own indicate that a broker is regulated.
Details regarding certification can typically be found on a broker’s website. If it’s not there, the likelihood is that it is not regulated. Due to concerns regarding the safety of deposits and the integrity of the broker, it is advisable that accounts should be opened only with brokers that are fully regulated.
Choose An Appropriate Trading Platform
There are many different trading platforms on offer with some more popular than others. The most well-known platform is MetaTrader 4 which has a number of different features and options and others including MetaTrader 5 and Webtrader together with a number of mobile trading platforms. Many top forex brokers also have their own platforms. It is highly recommended that a trader utilises a demo account in the first instance to learn more about what each platform has to offer. Most brokers offer free demo accounts to traders for this purpose which is important as it gives traders the opportunity to use the platform and determine if it is user-friendly, as well as trying out some practice trades before investing in the live markets with real money.
Account Types, Spreads and Leverage
All top forex brokers offer a variety of account types such as a standard, mini or micro account. The main difference is in the spread, which will differ according to the size of a client’s trading transaction. Generally speaking, there will be lower spreads for larger accounts. Traders should bear in mind that brokers make their money through commissions and spreads and one that uses commissions may charge a specified percentage of the spread; the variation between the forex pair’s bid and ask price. However, a number of brokers do not charge a commission and make money with wider spreads instead.
It is also important to find out how much or how little leverage a broker gives a trader before deciding how much leverage would be suitable for their particular trading style. New traders should take heed of the saying, “less is more” as leverage can quickly destroy a trader’s account since the potential for losses is magnified as well. Leverage should always be used with caution.
Top-notch customer support is vital for making a trader’s experience more enjoyable and directly impacts on their success as a trader. In the event a trader runs into technical problems on the platform or needs help with a range of other issues including withdrawals, it is reassuring to know that fast and professional help is on hand. If there is no immediate channel of communication with a broker, this can lead to major financial losses on a trader’s part. For this reason, it is very important to open an account with a broker renowned for offering a high level of customer support. Verifying this is simple and all a trader needs to do before opening an account with a broker is to ensure that there are several ways in which to contact them throughout the day, whether by live-chat, phone, email or web-form.
This is a very important part of a new trader’s research prior to choosing a forex broker. There is no better way to assess the standard and reliability of a broker than to read the feedback and testimonials of traders who have already used the services of a particular broker. Realistically, most brokers have advantages and disadvantages and it is best to be aware of these upfront. Online forex broker reviews can also be a good source of information regarding a broker’s overall service and can give a valuable insight into how a broker conducts their business.
Following these 5 steps will help a new forex trader kick-off their trading activities in the best way possible. It is always best to start out with confidence in a forex broker which will allow traders to focus their time and attention on developing forex strategies and making a profit. Researching a broker before making a commitment is extremely valuable and can increase a trader’s chance of success enormously in today’s competitive forex market.