How To Choose A Forex Broker
The foreign exchange market accounts for more than $4 trillion in average traded value every day, making it the world’s largest financial market. Since there is no central marketplace for the forex market, traders must select a forex broker to help them conduct their trading activity. There are a large and growing number of forex brokers, and choosing the right one requires cautiously sifting through an overwhelming number of magazine and internet advertisements.
You need to have a broker that is regulated in a country where the law is followed and legal protection is strong. For example, you are going to find that a broker regulated in the United States is more likely to be compliant than one that is regulated in a less industrialized and advanced legal framework. Recently, there was a broker that was based out of a country that was in the middle of a civil war at the time. Needless to say, this is absolute folly and very reckless for a trader to deposit money at this broker, no matter how tight their spreads were. The fact is that tight spreads won’t do you much good if you cannot get your money back! This could be the case either by fraud, as there is very little legal protection, or by an overthrow
of the government. As a general rule, if you don’t feel safe visiting the country, depositing your money there isn’t a good idea either!
This belongs first on the list because at the end of the day, the trading platform is where it all goes down. You need to decide before choosing a broker if you prefer an online forex trading platform or a downloaded one. Are you a social person who likes to be part of a community? If so, you might want to consider Currensee. Are you a person who likes a clean and easy to use interface? If so, you might want to consider eToro. Lastly, are you a person who likes to have many features and options when trading? If so, you might want to check out the various brokers who use the Meta Trader 4 platform. Whatever the case may be, make sure to decide what platform is for you and based on that choose your broker, not the other way around.
Some brokers do not allow scalping. Scalping is trading in and out of the market very quickly, with trades only lasting a couple minutes or less (sometimes seconds). If you want to scalp make sure the broker allows it. If unsure, email the broker before opening a demo account. If you are more into day trading, swing trading or longer-term trading this is not an issue.
Trade Execution Policy
Some forex brokers are known to offer high level of leverage, which appears to be attractive to traders following aggressive strategies. At that we’d like to notice that high leverage is acceptable for traders with significant experience on the market.
High leverage can lead to great profits, but along with this is it times and times more risky. Traders with conservative approach should rather look for moderate leverage offers. Another important aspect is that some brokers offer fixed leverage, whereas others have it adjusted to particular currencies. It may be important for a trader to figure these specialties before starting trading on a real money account.
Spread goes lower and lower every years, because of the higher liquidity and competition between the liquidity providers in the currency market.EUR/USD normal spread is below 1 pip 99% of the time. Most of the time it is even below 0.8 pips. It is a red flag if the spread that your broker offers is higher. On 2006 and a couple of years after, GBP/JPY spread was usually 7 pips and higher. That was a normal spread for GBP/JPY at that time. But now it is usually below 3 pips. If your broker doesn’t offer such a spread, then you have to be careful.
It is not that hard to find a good or even the best forex brokers if you know what you should consider as the features of a good forex broker.