Do you have a question, “How do I choose the right broker?” The Forex market is an extremely competitive place, not only for the traders but for the brokers as well. Choosing which forex broker to trade with can be extremely difficult, especially when you need to keep in mind all the variables that can influence your trading experience. Here we will focus on how to choose a forex broker checklist.
Since forex is the largest financial market in the world, it is only natural for the number of forex brokers to continue to grow. And with so many options available, how can you be entirely sure you made the right decision? While there are many aspects you need to look for when choosing a broker, the following 6 will have the most impact on your trading career.
How to Choose a Forex Broker Checklist – Top 6 Crucial Aspects:
Initially let get some basics of What is Forex Market with Examples before you ask question about How do I choose the right broker? Let understand few things here regarding how to choose a Forex broker checklist? Let’s dive deep into detail to understand more about it.
1. Level of Security:
Since the forex market has no central market place, it can not be regulated the same as any other market would be. But this does not mean that the activity in the forex market is conducted without any form of regulations. This is precisely why, throughout time, a significant number of regulatory agencies have emerged, to help ensure the security of the traders’ funds.
How do I choose the right broker? choosing a forex broker, make sure they are regulated by one (or more) of the most important regulatory bodies in the world:
- US: NFA (National Futures Association) and CFTC (Commodity Futures Trading Commission).
- UK: PRA (Prudential Regulation Authority) and FCA (Financial Conduct Authority).
- Canada: IIROC (Investment Information Regulatory Organization of Canada).
- Australia: ASIC (Australian Securities and Investment Commission).
- Switzerland: SFBC (Swiss Federal Banking Commission).
- Germany: BaFIN (Bundesanstalt für Finanzdienstleistungsaufsicht).
- France: AMF (Autorité des Marchés Financiers).
Any reputable forex broker will have its member number stated on the website, to prove they are a regulated broker. If you can’t find a member number, chances are, the broker is not regulated and your investments may be at risk.
2. Transaction Costs:
To put it simply, no broker operates without transaction costs. After all, this is how they manage to make money. Each time you enter a trade, you will have to pay either a commission or the spread, so making sure you find a broker that has affordable rates is highly important.
Some brokers that work on commissions, only charge a small percent of the spread, which works for some traders. But other brokers, despite advertising that they charge no commission, will charge a wider spread, to make money.
It is important to keep in mind that, even though it may be tempting to go for low-cost brokers especially at the beginning of your career, those brokers may not offer the same variety of services as more expensive ones. Reputable brokers, despite charging higher fees, provide a wide variety of services, such as market research, training materials, and tools and 24/7 support. Other brokers provide different trading models, such as Direct Market Access, for their premium clients, meaning you will have to pour a little bit of money into the account if you want to succeed. You can find a list of DMA forex brokers online if that is what you are looking for.
3. Deposit and Withdrawal:
No reputable forex broker will try to prevent you from withdrawing money, so if the withdrawal process is hard and takes too much time to complete, it should raise a number of questions. The only reason why brokers hold your funds is to make it easier for you to trade, meaning you won’t have to constantly deposit money into your account. But there is no reason why you should not be able to get access to your profit at any moment you may need it.
When it comes to deposits, most brokers do have a minimum initial deposit needed, but it can go on to be as low as $50 in some cases. If you add in the leverage, your trading power will be much larger than your initial deposit, plus some brokers even offer bonuses. This is what makes Forex trading so attractive to investors looking to increase their profits.
4. Currency Pairs Available:
Although there are over 60 currency pairs that people can trade on the forex market, not all of them get the same attention. The pairs are divided into three categories: majors, minors, and exotics.
- Major pairs: The most heavily traded currencies in the world, all of them including the US Dollar: EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD and NZD/USD.
- Minor Pairs: Most of them include the other three non-USD major currencies, which are the EUR, JPY, and GBP. Amongst the minor pairs are: EUR/CHF, EUR/GBP, EUR/CAD, EUR/JPY, GBP/JPY and GBP/CHF.
- Exotic Pairs: Exotic pairs are composed out of one major currency, such as the USD or EUR, and the currency of an emerging economy, such as Brazil or Mexico. Because these pairs are not as heavily traded as the others mentioned above, the fees may be higher than usual.
5. The Broker’s Platform:
Given the fact that the trading platform is your gate towards the world of trading, you will want to find a broker that not only is user-friendly but also provides powerful tools to enhance your trading experience.
Inside on how to choose a forex broker checklist, Look for a platform that is stable, has technical analysis tools available for you to use, and provides news and information that can help you trade. A well-made platform will have all the most important functions visible. A platform that is complicated to use can lead to the trader making mistakes that could cost greatly. To test the platform, open a demo account with the broker and use it to see if they have everything you need to begin your journey.
6. Customer Service:
Last, but not least, look for a broker that provides support anytime you need it. The forex market is open 24 hours a day, 5 days a week, so you need a broker that offers support round-the-clock. Choose a broker that you can contact as often as you need, and that has a team dedicated to answering all of your questions.
To test their support, give them a quick call and see how they answer your questions. It should be more than enough to give you an idea. This way, you can test wait times, the team’s knowledge and the way they treat their customers altogether.
These are few of the things to be considered when thinking on how do I choose the right broker? Hope this would have given answer for your question on how to choose a forex broker checklist. Leave us the comment to share more knowledge to other reads as well.