12 Things to Consider When Choosing a Forex Broker

Risk management is the smartest thing that every forex investor craves. Whether it is about choosing a Forex broker, choosing a type of fund, or investing in the funds, everything requires a smart sense of trading and market knowledge. Any point where you lack can cause severe damage to your funds. A few smart tips and tricks will always give you an upper hand while choosing forex brokers.

If you are a trader in the foreign exchange market, there are dozens of online forex brokers looking to win your business. Visit any financial news website and you’re likely to be bombarded with an overwhelming number of internet advertisements from forex brokers. In this article, we look at five things to consider when choosing the broker that is right for you.

Only trust a well-regulated broker

Nowadays, online forest trading leverages forex trading, and no doubt it is smart to trade online. As said earlier, knowledge is the mandatory source for risk management in online forex trading.  We recommend you to use well-regulated Forex Brokers. Everything that glitters is not gold. It means every forex broker you contact over social media who guarantees risk-free returns is not supposed to be reliable. A trusted and well-regulated broker lists its license at the bottom of its website. You can atleast check the trustworthiness of the forex broker in a matter of few clicks

A broker with an unlimited demo account

The concept of a demo account is an excellent way to assist those who are new to enter the field of forex trading. Every broker offers a demo account that looks similar to the trading account. We recommend you go with that broker who offers an unlimited demo account. Here, you can test and practice your strategies as much as you can without any risks.

Trading Platform

The trading platform is the investor’s portal to the markets. As such, traders should make sure a broker’s platform and software comes with the technical and fundamental analysis tools they need, and that trades can be entered and exited with ease.

This last point is especially important: a well-designed trading platform will have clear buy and sell buttons, and some even have a “panic” button that closes all open positions. A poorly designed interface, on the other hand, could lead to costly order entry mistakes.

Other considerations include customization options, order entry types, automated trading options, strategy builders, backtesting features, and trading alerts. Most brokers offer free demo accounts so that traders can try out the trading platform prior to opening and funding an account.

Copy-trading service 

If you’re a newbie and are lacking time to keep watching the market the whole day, you can go with copy-trading services. With the help of these brokers, you are allowed to copy trades of existing market players. Copy-trading brokers give you the portfolio of every experienced broker mentioning their success rate, loss ratio, and risk profile. 

Account features

Forex brokers have different account offerings. While making a comparison among forex brokers, you should consider 4 main characteristics.

1- Check margin and use leverage ratio with caution

2- Know how does the broker makes its money, and what commission does it take?

3-Brokers provide mini, micro, and standard accounts with varying initial deposit requirements.

4- Simplicity and flexibility in withdrawals and deposits

Variety of Trading Instruments

As mentioned before, traders don’t respond well to limitations. The more trading instruments a forex broker offers, the more opportunities are unveiled. Choose a broker that doesn’t just offer the Major currency pairs but also the Minors, the Exotics, precious metals and other commodities. Gold for example is a very popular trading instrument during times of economic and political instability.

New Client Requirements

Checking broker requirements is a good way to determine if a broker is trying to attract new investors or just churning out new clients to get their hands on their money. A good broker will not impose a minimum deposit requirement for new investors. Some brokers may not even require any deposit at all to open a trading account.

Commissions and Spreads

A broker that takes commissions may charge a specified percentage of the spread, which is the difference between the bid and ask of a forex pair. Many brokers that charge no commission instead make their money with wider spreads. Know how your broker makes its money and shop around.

For example, the spread could be a fixed spread of three pips (a pip is the minimum unit of price change in forex), or the spread could be variable depending on market volatility. The wider the spread, the more difficult it can be to make a profit. Popular trading pairs, such as the EUR/USD and GBP/USD, will have tighter spreads than more thinly-traded pairs.

Dealing Desk vs. ECN Brokers

Dealing Desk brokers work similarly to the dealing desks provided by various financial institutions and banks. A Forex broker who uses a dealing desk and is registered as a Retail Foreign Exchange Dealer and Futures Commission Merchant (or equivalent in another country) can offset trades. The No Dealing Desk system on the other hand offsets positions automatically and then transmits them to the interbank market. Brokers working through a Dealing Desk system do not work directly with market liquidity providers, therefore only one liquidity provider remains in the equation, and that gives birth to a fundamental conflict of interest.

An ECN broker on the other hand, offers its traders direct access to the other market participants through an Electronic Communications Network. Why is an ECN broker the superior of a Dealing Desk one spreads-wise? Simple: because it deals with price quotations from several trading entities, it can offer much better bid/ask spreads.

The business model of an ECN broker is an entirely fair one, as it eliminates a major conflict of interest: because it matches trades between various traders, it cannot become the sole market-maker, thus it cannot trade against its own clients. Another advantage of the ECN is that because of the lower spreads it offers, such brokers can charge a fixed commission on every transaction. However, you should not see ECN brokers as a panacea. Under certain conditions, their liquidity can dry up completely, creating much greater slippages than Dealing Desk brokers’ client might be suffering. Another sad reality is that many brokers describe themselves as of the ECN type, but have an element of dealing desk within their operation, so are not “true” ECNs.

Currency Pairs Offered

Many forex brokers online may offer you bitcoins, or another crypto, however, we recommend you to stay away from crypto as value changes in cryptocurrency pairs are highly unpredictable carrying financial risks in your trading account. Although cryptocurrency can give good returns in a short period of time, it is a variable asset. 

Payment Methods

Payment methods vary from one broker to another, but if you’re going to be depositing and withdrawing money to your accounts, you should see to it that you’re allowed to use the most convenient payment methods. You should check for payment methods that can help you get your money faster.

A good forex broker should also offer a variety of ways to deposit and withdraw money from your account, especially if you’re going to be depositing and withdrawing funds on a regular basis.

Forex Bonuses

Most brokers offer bonuses to their new clients, which is a great way to increase your trading capital. For example, brokers might give up to 30% or 50% bonus on your first deposit. This means that the bonus amount will be added right away into your trading account and you can use it for trading. Brokers usually allow you to later withdraw the bonus if you reach a certain trading volume. It’s recommended to read the broker’s bonus terms and conditions so you can understand all the advantages and restrictions that come with accepting a bonus.

Customer service experience

Forex trading is open round the clock, a broker that is able to provide customer support anytime will be the right choice for you. Also, check flexibility and constraints. Whether it is easy to connect with a live support agent on phone. 

Final thoughts

If you are confident with your forex broker, you will positively invest your time and money in developing forex strategies. I hope, these points will help you choose the right Forex Broker.

You should carefully choose your forex broker before you decide to put your money in their hands. All the things mentioned in this blog post are things you should consider to make sure you’re getting the most out of your trading experience.

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