First thing first, what exactly is a Forex Broker? For many of us this may seem like a new concept, when it actually is not. “Forex” is just a more convenient way of saying foreign exchange. What is that all about? Well, the foreign exchange market consists of foreign currencies of the world being traded; all in one place!
Fun Fact: The foreign exchange market is known to be the largest and most liquid market in the world!
When it comes down to choosing a Forex broker, it is necessary you check off at least 80 % of the headings below before you consider sealing the deal. Most importantly, the brokers must be safe and trustworthy enough for you to be able to rely on them.
Here are a few things to keep in mind when hunting down the perfect Forex Broker to trade with.
1. Measure Their Level of Success
In order to consider a proper Forex broker it is important to measure their success. A successful broker leads to a successful Forex trader. If a broker firm is frequent in trading it becomes easier to judge the kind of work they are capable of doing. They must be able to handle any kind of situation that comes their way; by managing your funds in a secure environment, maintains a strict policy of fair dealing with each customer, and the ability to assure you that each trade will be executed at the market price at the time.
2. Safety first!
During this process, it is obvious a lot of personal and financial data will be required to be transmitted. Often copies of your ID card or passport, utility bills, bank account information and in some cases even your credit card numbers etc.
The key is to get your information down to the point where you are sure that the required amount of internet security measures are taken care of. This will ensure that your personal financial data is safe from potential risk of stolen data, trading activity disruption, or even protect you from the danger of identity theft.
For this you might want to take your time looking around the website enough to satisfy yourself with knowing whether the site employs any kind of reputable internet security firm. For example, McAfee or Norton Symantec.
Here is list of a few countries with a strong security policy:
- United Kingdom: Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)
- Switzerland: Swiss Federal Banking Commission (SFBC)
- Australia: Australian Securities and Investment Commission (ASIC)
- United States: National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC)
3. Time for Execution
Time is what everyone is short on. Most importantly, not many Forex brokers are as honest as they should be. As a Forex trader, it is important you have your research done before entirely trusting just anyone. For that its necessary you study your broker’s trading process quite thoroughly.
As difficult as it seems, this may be one step you cannot just skip to save on time. It is critical enough to find a forex broker with a decent record in itself, but one with good trading execution practices may seem impossible but nothing you cannot find!
It is absolutely essential that your broker provides you a spot in the best price for your orders. As long as the market conditions are normal and not facing any surprise of events where the position is compromised; there is no reason for your broker to act otherwise.
4. What Costs Will Come Along the Way?
The one cost you will face no matter what you do; is the transaction cost. There is literally no escaping it!
The possible costs you might face would be commissions, service fees, spreads etc. However, the major costs to look out for are the miscellaneous fees; additional fees or withdrawals, deposits, wire transfers, credit card, inactivity, and even account closing!
With every Forex transaction comes the payment for either a forex spread or a commission and definitely a service fee of some sort. Naturally, one is expected to keep an eye out for the most affordable and cheapest rate option available in the market. Although, it really is just a game of give and take. Sometimes the sacrifice of lower transactions in order to achieve a more reliable broker is actually the best option for you.
This is a moment to act wisely as the market is full of Forex brokers that typically offer high levels of service with visible benefits like market analysis, customer service and support, trading platforms etc. But this is when you must keep your eyes peeled to reassure yourself that you’re getting what you paid for.
Regardless of the amount of hassle you might have to face, it might be best to make sure you review your available options. Just like the fitting and comfy feeling of your favorite sweater, it must be a balance of proportionate levels of security along with affordable transaction costs.
5. Find a Suitable Platform
To get things started you will require a trading platform. This is where the fun begins and you are taking the first step in to the world of forex trading.
In order for all of this to take place it is necessary you find a software that is easy for you to work your way around, user friendly, but also at the same time is rich and powerful to assist you in meeting all your trading needs!
Mostly the forex brokers offer demo accounts for your ease in order for you to take a look at their trading platforms before you sign up for a real account to jump in on sealing the deal
For instance, if you are an experienced trader you might want to look into Metatrader 4 (MT4). The standard software for forex trading designed for those with a little know-how, tends to be highly customizable, programmable, and provides a wide range of charting and tools that may be used for back testing, etc.
Some brokers may provide web based trading platforms that allows you to trade via browser only. This removes the need to waste space and go through the unnecessary trouble of installing Forex trading software. If you’re a Mac owner, this might be the best thing for you.
Although, these platforms may not be as fully loaded as a Forex trading software might be. They won’t have many features other than basic trading tools and charting functions; suitable for beginners in the trading market.
Similarly, it is also easy to manage to trade via social platforms. This is easier as you can discuss and learn from people in your social circle. It allows you to gain info from a trusted source, while you watch them and even learn from them to copy the strategies you feel might be of some use in your trading times.
6. Determine Your Trading Style
You must know what your trading style is so that you can determine which Forex broker fits perfect your needs. So whether you are a short-term trader, self-directed, automated, one with several accounts or even a social trader; you must know which one specifically.
For those traders out there that have a time constraint; long term traders you probably have zero interest with spreads and the speed of trade. Your interest may lie somewhere in-between swaps; overnight interest rates offered by your broker.
For one with several accounts who wants all of their funds to be managed by one or more skilled professional(s), it is essential you choose a broker that provides PAMM accounts. With this all set in motion, you’re all set and ready to go.
7. Customer Service
Listen up all you amateur traders, this section is especially for you!
Nothing here is more important than customer service. It is absolutely essential for there to be helpful support staff present at all times. They are there to help smoothen the rough patches out for you, help you figure out how things work at each step of the way, be it the know-how of the trading software or while opening an account.
A business of any kind is known for the kind of customer relations they build. Of course, you will only recommend a broker for trading to your friends if your experience was up to the mark.
Many brokers offer customer service in every language available for live chat all the time. This makes problem solving easier for the customer and the company, avoiding any inconvenience for either one.
8. Compare Brokers and Ask For Demo Account
Once you have evaluated the Forex brokers on the above criteria you should be able to shortlist 2-3 Forex brokers to work with. Here is simple brokers’ comparison table to compare your short listed brokers. Instead of going all out at once, it is highly recommended to ask for demo account. Play around with demo account, trade in different environments and test all Forex software features before finalizing your Forex broker.