Forex trading has picked up pace in the last 10 years. You don’t have to be a traditional investor or trader to step into the Forex trading market. While it is fairly easy to start trading, making a profit is not as straightforward as you might think. You need to understand every pro and con of a currency pair, you need to decide the position that you will be holding, you need to check if Forex trading is legal in your country, and more. But, all the hard work and research will amount to nothing if you do not have a reliable forex broker by your side.
A few years ago we wrote an article on how to find a good forex broker in 17 practical steps. This year we realized that we need to give a simple answer to this question.
Find a Forex broker that you can trust. It is imperative because they will be in control of your monetary investment. What if you have good capital and a plausible trading strategy but your broker is not trustworthy? They can run off with your money, leaving you with nothing but a bruised pocket!
There are three the most important things to consider when traders want to find a good broker: regulation, support, payment options. If traders want to find a good forex broker they will need to analyze the most important broker’s characteristics such as regulation and security of funds. The security of funds and regulation is very often correlated. The greatest security in trading for any trader represents A-Grade brokers regulation. High reputable brokers are regulated by USA (Commodity Futures Trading Commission CFTC, NFA) – Japan (FSA Japan) – United Kingdom ( Financial Conduct Authority FCA) – Australia (Australian Securities and Investments Commission ASIC) – Singapore (Monetary Authority of Singapore MAS) – Hong Kong ( Securities and Futures Commission SFC) – Switzerland (Financial Services and Markets Authority FSMA) – Germany (Federal Financial Supervisory Authority BaFin).
While all forex brokers offer Metatrader platform these days, payments and support are characteristics that are vital for future cooperation. Regulated and good forex brokers will offer several deposit and withdrawal options and provide fast payments. Good brokers offer live support, efficient ticket systems with fast response in 24 hours.
Some tips on how to get a broker on forex:
1. Know your needs
You can only find a compatible Forex broker when you are aware of your needs. First, you should know how much you will trade. Once you have decided that, assess if you will be comfortable with making big or small moves. By figuring this out, you can make informed choices while selecting a broker. If you believe that you will be capturing small moves by trading a number of times in a day, an ECN broker will be the right choice for you. This type of broker will be a good option for those traders who will be scalping.
It would also be wise to have a particular number when it comes to investment. If you have a small capital, you will be trading micro-lots. With an investment of $5000, you can shift to the mini-lots. It is not tactful to open a standard account with capital that is less than $50,000. Now, choose a broker that is suitable for your lot size. You must also check the payment and withdrawal options offered by different brokers.
2. What is the broker offer?
By identifying your needs, you would be able to shortlist a few brokers. It’s time to compare the selected brokers. Every broker has a different USP, you need to find the one that will make trading easier for you. If you are a day trader, you won’t be needing a trading desk because there will be no time for back-and-forth communication. Day traders trade directly as making an offer through a trading desk is a time-consuming process and often leads to re-quotes. Thus, you can choose a broker that offers this liberty but this will not be ideal for those who are holding long positions. Such traders will find it extremely difficult to function properly without a capable dealing desk or customer support.
The next and the most important thing that you need to check is if your broker is regulated or not. There are a number of regulating authorities but you should focus on those brokers that are regulated in countries like the U.S.A., Canada, New Zealand, Japan, U.K., and Australia as these countries are deemed to be financially established.
Look for a broker that can offer competitive spreads. You are more likely to get it if you are a day trader. The next checkpoint on the list is the types of accounts that the broker is offering. Having the option of a demo account is major traction for many traders as they get to test the trading platform before investing the real money. You can use this demo account to test other services offered by the broker. For example, you can send numerous emails using the demo account and note the time taken by the customer support in responding. If they are not quick and efficient enough, it would be better to look elsewhere.
3. Look for reliable reviews
A majority of people read reviews before investing in anything. This is a good practice and can save you from making mistakes but when we are talking about brokers, you must know the source of information as well. Never blindly follow anything that you find about the broker if you cannot link it to a credible source. This holds for both positive and negative reviews. Positive reviews can be paid while the negative ones can be fueled by competitors. Rely on your objectivity and authentic published reviews. You can also talk to the other traders and investors who are using the services offered by your shortlisted broker.
4. Do beta testing
The other three points must have helped in eliminating a lot of brokers from your list. Now, instead of relying on someone else’s opinion, you can test the remaining brokers yourself. The best way to check if the broker delivers what they promise is by using the demo account offered by them. Once you have opened a demo account, start trading. Since these are dummy trades, you will not be losing any real money. Check if the spreads are tight and the trades are being executed instantly. You must also see how good is the trading platform. Is it constantly crashing? Are there glitches? If the trading platform is not fast enough, you can miss many opportunities in the future.
Test out the demo account for a couple of weeks and then open a live account. Do not invest more than 10% of your capital at this time. Don’t forget that you are still testing the broker. Trade with this amount for a couple of weeks and keep posing questions to customer support. Check how quickly they respond to your queries.
The next crucial factor to check is the withdrawal time. After trading for at least two weeks, you must initiate a withdrawal. You might have to pay a small fee for it. The ideal time for this transaction should be 2-3 days. If it is taking longer, it can cause problems in the future with bigger withdrawals.
5. Be wary of bonuses
Always remember that nothing in the Forex market comes for free. There are many brokers that offer bonuses, for example, ‘Get $100 bonus cash when you open a $500 account with us’. They might credit your account with the bonus cash but they will definitely take it back from you in the form of one charge or another. Usually, the trader will get some kind of restriction when he or she can withdrawal money based on trading volume.
Good brokers are regulated, with excellent and efficient payment systems and hard-working support.