Looking for a good Forex broker? Here are 6 aspects to keep in mind
Back in the day, forex trading was something only corporations and financial institutions took part in. But in recent years, this has become commonplace activity for both individual traders and investors looking to speculate on the future price changes in a currency in order to increase their earnings.
The forex trading volume is enormous, reaching $6.6 trillion on average every day. The market is open 24 hours a day, Monday through Friday, and people from all parts of the world can join in. While trading forex might seem like the easiest thing in the world to the untrained eye, it actually requires specialized knowledge and a thorough understanding of the market.
For first-time forex traders, there’s a lot of information they have to process before they dare to venture into the market. If you’re just starting out or you’re simply toying with the idea of foreign exchange as a side gig, one of the challenges you’ll face is choosing the right forex broker.
Why it’s important to choose a good forex broker
Your choice of broker will have a direct influence on your trading experience and the outcome of your trades. The job of a forex broker is to provide you with easy access to the forex market where you can trade currency pairs. They serve as a middleman between you and the market, and they make money by charging a commission each time you make a trade. Some brokerages will even help you expand your knowledge in the field by offering relevant advice and information on forex-related topics.
However, as with all services in every industry, not all forex brokers are created equal. The tools, the quality of the platform, and the support they offer differ from one broker to another, and with the overwhelming number of options available right now it can be quite difficult to find a reliable broker that will match your needs.
The last thing you want is to trust your hard-earned money to a broker that vanishes overnight, leaving you with a huge hole in your bank account. So, if you want to make a smart choice and start your journey as an FX trader on the right foot, here are some of the aspects you should consider.
Your own needs
You can’t find a forex broker that will suit your trading needs if you don’t know what you want and need in the first place. So, the first thing you have to do before you start your search is to assess your personal requirements. The frequency of your trades, trading small moves vs big moves, the capital you have available are all determining factors in choosing the right type of forex broker.
Brokerage companies are a dime a dozen these days, but not all of them are to be trusted. So, how do you differentiate the good ones from the bad ones? By doing a bit of research and checking their reputation. Some brokers may have great-looking sites, but that doesn’t necessarily translate to great services and reliability.
If you want to play it safe, opt for a regulated broker. Luckily, you don’t have to check every single platform to see if it’s trustworthy or not. There are plenty of sites providing extensive lists of forex brokers where you can find information on regulatory compliance and other relevant details that can help you make an informed decision.
Another way to gauge a broker’s credibility and trustworthiness is by reading online reviews. The digital space is a good place to find information on all topics and subjects that might interest you, and forex makes no exception.
From expert reviews to feedback provided by other traders, there’s plenty of information circulating on the internet that can point you in the right direction. If the majority of the reviews about a brokerage company are negative, you’ll know to steer clear from them and take your business elsewhere.
If you need a bit of extra insight into a forex brokerage and learn things directly from people who’ve actually traded with them, forex forums are the best places to conduct your investigation. You’ll come across all types of traders sharing their stories in the forex world, both the negative and the positive and you can use their knowledge and past experiences to narrow down your search.
By now, you should have a list of forex traders that might match your requirements. This is where you have to go a little deeper with your research and evaluate each broker’s account offering. There are various factors and features to pay attention to here.
For starters, you should check the margin-based leverage they provide. Secondly, know how the broker will charge you for their services, whether they take a commission or make their money with wider spreads. Thirdly, learn about the conditions for deposits and withdrawals to protect yourself from unpleasant surprises. And lastly, check availability and make sure the broker provides adequate customer support, so you can contact them should any issues arise with your account or trades.
Test out the broker
Just like you wouldn’t buy a car without taking it for a test drive first, you shouldn’t choose brokers before testing them out thoroughly either. The best way to make sure a broker is the right fit for you and can provide the trading experience you expect is to open a demo account with them and see how things go. Opening a demo account will provide insights into trading conditions, speed of transactions, and reliability of the platform.
If after several weeks of using a demo account you’re satisfied with what the broker has to offer, you can proceed to open a live account. Take things slowly and start making small trades, to further test the features and functionality of the platform. If things live up to your expectations, you’ve found the right forex broker for you.