Top 10 Tips for Choosing Reliable Forex Trading Brokers
Recently, more and more people are looking towards trading as a form of investment as well as a form of business. Forex trading or forex trading is fast becoming one of the most popular forms of investment trading today.
And with minimal start-up capital required, the barriers to entry are quite low and this has made it easy for the man in the street to start trading the Forex market.
However, unless you are a bank or a large financial institution, you will need the services of a broker to be able to trade currencies.
Fortunately, with an increase in demand for FX Trading, there is a corresponding increase in the number of Forex brokers on the market.
However, with so many brokers to choose from, the problem most would-be Forex traders face is not how to trade, but how to select a reliable broker to start trading with.
Unfortunately, not all brokers on the market are created equal. You will need to find a suitable broker that meets your specific needs as a trader.
And from experience, this might be the tricky part, since not all brokers offer the same services or have the same fees and policies. Slight differences in charges, such as the pip spread, will have a big impact on your bottom line profit.
Seriously, if you want to make a living as a Forex trader, you need to focus on the markets and not have to worry about questionable brokers. Therefore, choosing a reliable Forex currency trading broker should be one of the top priorities you should make before you start trading.
There are actually several factors that make a good forex broker, and these are my top 10 tips for choosing good forex trading brokers.
1. Reputation
Reputation is important in this business, as there are a large number of “football” operations in the market. Basically the general rule of thumb is to stick with the more established Forex currency trading brokers who have a good track record.
An important factor to keep in mind is that all your business dealings must be verifiable. Do they have a legit office with many satisfied customers? Have they been in business for many years or did they appear overnight?
You can find a lot of information on unbiased review websites that talk about their experiences with brokers. If someone was scammed before, you should probably stay away.
Dependent brokers must be transparent in their dealings and operations. Relevant information about how they work should be readily available online so that potential traders can easily find out more about their reputation and performance.
2. Regulation
Regardless of the country you live in, always choose a Forex broker that does business in a country where its activities are supervised by a regulatory authority. A trusted Forex broker should be regulated and accountable to the relevant authorities.
For example, the Swiss banking system is one of the strictest vessels in the world regulated by the Swiss Federal Department of Finance, while US Forex trading brokers must be official members of the National Futures Association ( NFA) and be registered as futures. Commission Trader (FCM) with the Commodity Futures Trading Commission (CFTC).
In other words, they must adhere to and comply with industry rules and regulations. The last thing you want is an unregulated broker in the middle of nowhere holding your money. If they go under, good luck getting your money back.
If a broker is not regulated by any monetary authority, it might be better to select another broker instead.
3. Differences in the pip spread
Unlike stock brokers, forex trading brokers do not charge a fee or commission, but instead get their commission from the difference in the pip spread of the currency pair when you trade.
Unlike other financial markets, the forex market is not traded through a central exchange, so the value of this spread is determined by the broker you are using instead.
Most Forex brokers post live or delayed prices on their websites so traders can compare spread differences, and some brokers even offer a variable pip spread.
At first glance, the concept of a variable spread may seem tempting due to the volatility of the Forex market. When the market is calm, the spread is relatively small, but when the market really heats up, the spread gap could widen enough to wipe out your profits.
Unfortunately, many brokers are known as “bucket shops.” They do not have your best interest in mind and some have been known to change spreads to their advantage.
The bottom line here is still to look for forex brokers with low, fixed pip spreads regardless of how the market moves.
4. Speed of execution
In my book, this is something most novice traders rarely notice when signing up for a trading account.
Most brokers post live prices on their trading platform, but the question here is how fast they can execute the order once you click the “Buy” or “Sell” button.
Order execution speed is imperative, especially if you are a scalper trading on the 5 minute charts, you can’t wait another 5 minutes just for the order to be confirmed, right?
Fortunately, the best solution to this problem is to open a demo account with the broker and give it a test drive. This will allow you to test the execution speed of your trading platform.
5. Minimum trading account size
Today broker leverages are getting higher and higher to cater to the small retail trader who has limited capital but wants a piece of the Forex action.
Micro and Nano accounts are available, but most brokers offer the 2 standard types of trading account size, namely the Standard and Mini account.
The key difference between a standard and a mini account is that a standard account trades in 100,000 units, while a mini account trades only one-tenth of that size, or 10,000 units per lot.
In other words, the mini account takes up one tenth the size of the normal account. This allows you to risk one tenth of what you would be risking in the normal account.
6. Margin and leverage
Margin accounts make up the basic framework of Forex trading, so make sure you are fully aware of the broker’s margin terms before you rush to open a live trading account, the last thing you want to hear is a margin call from your broker.
Make sure you are fully aware of how your broker calculates margin requirements and it changes according to the currency pair traded? Is it fixed or variable at different times of the day or week?
Please note that some brokers offer different margin requirements for Standard and Mini accounts, so be careful.
And when it comes to leverage, most traders are familiar with the 1:100 ratio, but did you know that some forex trading brokers these days even offer leverage up to 1:400?
A word of caution if you are a novice trader do not use too much leverage as this is one of the key reasons why many novice traders disappear so quickly. Remember, the key to winning the Forex game is to make small, consistent profits.
7. Reinvestment fees
Rollover fees are charges that are incurred when traders move their positions to the next trading day.
If you are a scalper or a day trader, this fee may not affect your trading account, but if you are a swing trader or a long-term trader, this seemingly small figure can sometimes snowball if you don’t. knows.
This is why it is important to know the minimum margin requirements to win on an overnight position. Is it a mere 0.5% or a staggering 2%? Go do the math.
8. Trading platform
A good trading platform should not only display real prices that allow traders to “buy” or “sell”, but also a host of other features such as charting tools and technical analysis.
Some platforms even offer more advanced features like trailing stops, mobile trading, and even the use of automated trading software called an expert advisor.
Most brokers will have their own trading platform, but many use the Metatrader 4 platform as it is a fairly easy to use system that can cater for all levels of traders, from beginner to expert.
In my book, the type of trading platform used can make trading Forex very easy or a real hassle, so make sure you get a feel for the platform by signing up for a demo account.
9. Technical support
Usually the type of support comes in the form of phone or email support, and even “Live Chat” in some cases.
Since the Forex market is a 24-hour global market, similarly, the corresponding support provided by the broker should also be 24-hour round the clock.
Remember, it might be 3pm in the afternoon for you, but it could also be 3am in the morning for another trader around the world, so make sure there is someone at the broker’s office to take the call if something goes wrong. evil.
An essential aspect of support that should be highlighted is the ability to close an “open” position over the phone in the unfortunate event that your PC crashes or the Internet connection fails. Be careful, anything can happen if Murphy’s Law is activated.
10.Additional Value Added Services
Most of the best Forex trading brokers offer great value-added services in terms of free webinars, technical tools, eBooks, articles, and even daily market analysis and updates from their own panel of in-house consultants.
This could be useful if you are the type of trader who trades on the fundamentals.
Well that’s my 2 cents worth when it comes to finding reliable Forex trading brokers, I hope it gives you enough information to get you off to a good start in all your Forex trading ventures.
Have a safe and profitable trading day ahead.