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Forex brokers: how to make a right choice

Table Of Contents

  1. So, let’s analyze the situation
  2. Main criterion
  3. Feedback about brokers
  4. Legality and diversity of broker’s activity
  5. Trading conditions
  6. Tips: how to choose Forex broker

Before you start trading on Forex you should choose a Forex broker which will represent your interests as a trader. There are a lot of hidden pitfalls in the process of choosing a broker as to define the best intermediary by one factor is very difficult especially for a newcomer. However the whole success of business will depend upon the right choice at the very beginning.

So, let’s analyze the situation

One-day money turnover on Forex makes up 5 trln. US dollars. The major part of this amount is formed by large banks and corporations. The remaining part goes to private speculations.

Besides, Forex is a market with no centralization. It has no strict location where all the traders can control transactions. It has no market traders who provide quotes either. This job is fulfilled by the world banks as they make regular transactions between each other.

Thus, those who want to directly contact banks must enter credit relations with them. However, it is a very serious expenditure item that is unattainable luxury for most market players.

In their turn, retail brokers are assistants to private traders. They connect large banks with private traders. With financial support of many clients they can arrange credit relations with large banks. It means that retail brokers represent interests of their customers.

For example, you make an order for purchase / sale of currency. Your broker exchange positions with partner banks. This is a paid service; you will be charged a spread that is difference in purchase and sale value. Brokers also pay spread at the interbank market, but it is lower than yours. Obtained difference is a broker’s profit.

Another problem is brokers which go into bankruptcy and don’t return money to traders. In this case the trader has not protection at all.

Main criterion

While choosing a candidate you entrust your money to you should pay special attention to a range of criteria. The main criterion is broker’s reputation. The choice of Forex broker must be based on that very criterion as serious dealing centers do not plunge into adventure because they highly appreciate opinion of the traders.

Thus, at first you need to study thoroughly TOP Forex Brokers and find out the position of the favourite broker. If it is in the top of the rating or even in the middle of it the broker can be considered further and compared with other brokers by different parameters.

Feedback about brokers

First of all you should look at feedbacks of Forex brokers’ customers. Any TOP Forex rating contains different opinions of market participants being very useful information. It helps define which Forex broker to choose in the end.

While studying feedbacks it is necessary to take into consideration both negative, and positive opinions. If there are no negative feedbacks you should study positive ones very attentively. You will learn about advantages that may be the critical edge in some cases.

Legality and diversity of broker’s activity

It is important that the intermediary has a special license allowing working on Forex market. Then it is also important how many tools the broker uses, how many currency pairs and other assets it has. Thus, you can find out whether the broker is serious and prospective to cooperate with.

Trading conditions

When you choose a Forex broker you should pay attention to the conditions it offers to the trader. Often new comers do not consider this factor to be essential and as a result, lose their profit and work under conditions which are not comfortable for them. Nevertheless it is just needed to get answers to some questions and clarify information about some points such as:

    1. Size of spread. It is an important parameter you need to monitor together with size of commission for each market tool. The less these parameters are, the more profit the trader will gain.
    2. Start-up deposit. It is a parameter that is provided in the Forex rating and is very important for the beginners.
    3. Size of leverage. This parameter is also included in the Forex rating information and can be useful for experienced traders as it helps form larger quote in the course of trading session.

Tips: how to choose Forex broker

    1. While choosing a Forex broker find our whether it is registered in NFA or CFTC.
    2. If you don’t want to pay extra money for spreads choose companies that charge a commission (ECN accounts).
    3. It is important that the broker has good client support system. Moreover you must sign Security Agreement.
    4. Read feedbacks about the broker and check his reputation.
    5. Don’t believe those brokers who promise extremely large profit.
    6. Check whether the broker has reasonable leverage / margin.
    7. Broker must limit your entry to prevent slippages during the period of the excessive volatility.
    8. Get the information about the broker, study its website, read feedbacks, apply to the client support and so on.
    9. To earn money on Forex it is very important for the trader to be ready to withdraw money fast. That is why you need to learn not only how to deposit money, but also how to withdraw it. If the broker is located abroad there can be certain difficulties.
    10. The last, but not the least aspect is well-designed software. It will secure both additional comfort and safety of your funds while working on Forex. Forex players sometimes come across with the situation when bad software results in the loss of profit as the trader cannot close or open the deal.
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