With 5.3 trillion value traded per day, the brokers in the forex market are growing exponentially in number. You must have seen a significant number of forex ads popping up while surfing the internet. And in many ads, you may see lucrative offers such as lowest transaction rate, lowest brokerage, etc.
To trade in the forex market, it is important that the trader should get associated with a broker as there is no central marketplace for forex. But within this jungle of brokers, how you are going to select the genuine one?
In this article, I am going to make you aware of the five things that you should remember while choosing your forex broker:
Different brokers offer different service rates. The most common offers that you should compare are:
- Commission and Spreads
- Leverage and Margin
- Deposits and Withdrawals
- Initial Deposit
Commission and Spreads: Broker makes money by charging a commission which is a percentage of spread ( the difference between ask and the bid price of a currency pair). Many brokers offer zero commission on spreads, but they charge on wider spreads as it ‘s hard to make profits in a wider spread. Do read the terms and conditions carefully before finalizing your broker.
Leverage and Margin: Forex trading can be done by taking loan from the broker. For those who trade in such a way opt to open a margin account. Now, the amount of leverage (credit given to the margin account holders) varies from the broker to broker. Leverage is good to make profits, but one should trade carefully as the losses can even destroy a trader’s account.
Deposits and Withdrawals: There are two things to check when checking the terms and conditions of deposit and withdrawals. Firstly, check the options that the broker is giving to accept the funds. Make sure that the funds can be deposited using all the easy payment methods such as credit cards, PayPal, ACH, wire transfer, check, etc. Secondly, take into account the fee that the broker is changing to every transaction whether deposit or withdrawal.
Initial Deposit: There is a high competition when it comes to the initial deposit. Many forex brokers let you start the account with as low as $25.
Compliance from a Regulatory Body
Every country has its regulatory board to protect the forex traders from fraud, and that is why it is important that your broker should be the member of one. In the US all the trusted forex brokers are registered with the U.S. Commodity Futures Trading Commission (CFTC) as well as the member of National Futures Association (NFA). These organizations make sure that all the members follow the regulatory responsibilities.
All forex brokers with an attractive website should not be considered a member of the regulatory organization. You need to check the ‘about us’ page on the website for the membership number. It is essential to keep your deposits safe.
As the forex market is active 24 hours a day and seven days a week, its customer support should also remain active 24×7. The best way to check this is by taking the contact number from the broker’s website and calling at the customer care’s number once at the daytime and even at the night time. Make sure that you get help from a live person rather than an auto attendant. The customer support group should be quick in answering the questions to an acceptable level of satisfaction. You can ask about leverage, regulations, commissions, etc. Check the contact time with the customer care.
The user interface of the broker’s trading platform should be so simple that one can quickly open and close the position just by the click of a button. It should be so beautifully categorized that even the first glance can make you understand at least ¼ of its features. Do check the fundamental and technical analysis tools offered by the broker. Some brokers even add a special ‘panic’ button which can close all the open positions in a single click.
An additional feature that your broker should offer is the freedom of customization. The trader should be able to customize his trading platform according to his convenience.
There are some major currency pairs which the whole world trades in. These majors are the EUR/USD, USD/JPY, GBP/USD and USD/CHF. There are many other pairs offered by the forex broker, so it is crucial that you should check which broker is offering the maximum pairs.
It is important that your broker should be trustworthy as only then you will be able to do your technical and fundament analysis with a relaxed mind. A committed broker and an excellent analysis can help a lot in increasing the odds of profit.