Choosing a forex broker that best meets your needs can be quite a daunting task if you don't know what you should be looking for. Beginners try to find a suitable broker through trial and error which is not advisable. With some essential groundwork it becomes easy to identify the right broker whom you can trust. Let's find out what criteria you should look for while deciding upon your broker.
Don't be lured by too-good-to-be-true claims of Forex scamsters or merely professional looking trading websites. Always check whether a brokerage firm subscribes to any regulatory authority or not. Each country has its own regulatory body that easily distinguishes the bonafide from the counterfeit. A brokerage firm that is regulated will state this on its website in the About Us section. Thus for the safety of your funds and transactions only open trading accounts with brokers that are duly licensed and regulated.
What each forex broker has to offer in terms of leverage, spreads, initial deposit, deposit and withdrawal policy, trading instruments etc. varies from broker to broker. While some brokers offer leverage of up to 50:1,there are others who offer leverage of even up to 200:1.While accessing leverage it is important to remember that it is a two-edged sword which can accentuate your gains as well as losses and hence must be exercised with caution.
Brokers mint money via commissions and spreads. Brokers that claim to charge no commissions may make profits through wider spreads. Again, brokers that charge very low commissions may not provide adequate security. Popular trading pairs like the majors usually have tighter spreads.
Starting deposit: Many brokers offer minimal starting deposit for as low as $500 or $1000. Also, investors can choose between a mini, standard and micro account with varying deposit criteria.
Ease of Deposits and Withdrawals: Always verify the deposit and withdrawal policies of your broker. Reputable and trusted brokers always have user-friendly and easy policies for their clients to understand and operate. Carefully read through the fine print in order to avoid problems later on. If you find that few clauses in a broker's withdrawal policy may cause problems it is best not to consider that broker.
Trading instruments: While most brokers offer a wide choice of instruments for you to trade with only a select few are popular amongst investors and hence trade with the greatest liquidity. Even if your broker offers multiple assets do check if the assets of your choice are available or not.
The trading interface that your forex broker offers is key to your performance. Always check whether the platform offers automated trading or is a customisable one, whether it is user-friendly enough, if it has proper charting and analysis tools, news alerts and back-testing tools so that you can execute your trades with seamless ease. A faulty interface will result in costly trading errors and poor execution that you can ill-afford. Your trading platform is your portal to the currency markets. Most brokerages also offer free demo accounts so that you can test your strategies in simulated conditions without risking any real money.
The competence of your brokerage firm in providing key account-related support and dealing with technical issues cannot be ignored. Most brokers are generally very responsive at the time of opening an account but have dismal after-sales support. As the markets are open round-the-clock your broker's client service representatives should also be available 24/5.Often making a quick call to check the quality of your broker's customer service will give you an idea about the type of customer care available along with the average wait time and their ability to address queries to your satisfaction.
Don't tend to get carried away or be impressed easily by seeing the glossy marketing and sales pages that a broker provides. Always look for online reviews and make use of other resources in order to ascertain the credibility and legitimacy of a broker. While even the best firms might have one or two unsatisfied customers, if the number of positive reviews about a broker outnumbers the negative ones by all means settle for it. Beware of potential warning signs like inability to communicate, hidden fees etc. The rating of your broker will be based on past and current customer experiences.
Every trade that you execute will be affected by your broker. Thus, finding a reliable and reputable broker is crucial. If you can repose total confidence in your broker then you can turn your focus totally into your trading performance. It's ultimately your money and your future that is at stake, so making your choice of broker by observing caution and after thorough research will be instrumental to your success.