Often times we’re confused, to say the least, in choosing a suitable forex broker that we’re comfortable with and one that we feel will make us more profitable. Some brokers cheat their clients and trade against them. The reputable ones don’t, they are even afraid to do so. So what are some of the most important things to look out for when deciding on which forex broker to deal with? Well, I have gathered what I think are the most important things to tick off the checklist when you’re about to do trade currency with a dealer or representative.
Location of the Forex Broker
One most important thing that I like to think of when choosing a broker is the proximity of the broker to me. How far away from me can I find the office of the broker? Are they in the same country as me? Can I easily commute to them to file a complaint or have someone to talk to in person if problems arise? This is a serious point to consider if you’re an investor who cares about his money. The one thing you would want to ever avoid is having your money locked up with someone and then not having a way to meaningfully reach out to them other than phones and emails, which can be ignored at will.
How Big the Broker is
Why does broker size matter? Well it’s logical, the bigger a broker is and the bigger their capital, the better leverage and spreads they can provide. And I believe you’d agree that spread is an important factor when it comes to the success of a trader. When we’re looking for brokers to choose from the most important thing we look out for is how much spreads their providing, be it a fixed spread or a floating one. Also trade executions on bigger brokers are better because they have better liquidation. Don’t ever choose a broker without taking into consideration how tight or wide their spreads are. You’d want to compare a couple more brokers before putting in your hard-earned money if you intend to win.
Is the Broker Regulated
In the forex market, there are several bodies that make sure forex brokerage firms stick to certain rules to protect traders and investors. For instance in the USA, one regulatory body that guides trading businesses is the National Futures Association (NFA). The NFA is there to protect investors, so if you’re trading with a broker that’s under the jurisdiction of the NFA, you can just go to them and file a complaint and they’ll look into whatever problems you’re having with the concerned brokerage firm. Same is the case with other regulatory bodies such as the The Financial Conduct Authority (FCA) in the UK. The Financial Service Authority (FSA) was functional from 2001 until 2011, so if any broker claims they are FSA-regulated, you need to get suspicious. I have seen some brokers in 2015 that claim so. Interesting right?
So what if your broker of choice is not NFA or FCA-regulated? It’s your duty to do some little research in finding whether your broker of choice is regulated. It’s not difficult, just ask them or check their website. Then, check the credibility of their regulatory body and actually, if possible, find a way to confirm that the broker you chose is in fact regulated by them!
Available Trading Platforms
Personally, I find it easy to trade using the MetraTrader 4 (MT4) platform. It has a plethora of tools that makes the life of a trader easier. Even though I don’t use most of them, it’s good that they are there. Dukascopy’s JForex platform is not bad either. But then of course you’d have to trade with Dukascopy, which in itself is not a bad broker. Others prefer Oanda’s fxTrade Desktop. If you haven’t found a platform yet, it’s safe to experiment on as many platforms as possible to see the one that best fits and gives you some comfort while trading. And this is the only time I’d recommend using a demo account. I have a reason for this.
But I bet most traders will fall for MT4 anyway unless they have very special reasons not to, which is understandable because, hey, at the end of the day, it’s your money right?
Most brokers have different account types that they offer. This is the easiest thing do. Among the factors to be considered when choosing a forex broker is to check the account types that they have. Some of these accounts require higher deposits, some offer different kinds of spreads et cetera. Your job is to look through them as part of your to-do list when you need to find a forex broker to start trading with.
This comes in last, but I must mention that it’s quite important. If you’re lucky in finding a broker that is in the country in which you’re located, then of course they’ll speak your language. I have seen some traders open trading accounts with brokers that offer only English support when they (the traders) themselves can’t communicate very well in English. You know what I call this? Stupidity. Not only is the language important in choosing your broker, you could also check how often or how many days they are online for a live chat when the trading session is open. This will mean a broker that offers live support 24/5 is quite ideal. Exness for example provides 24/7 live support. This is not the reason I like them but it’s a cool thing to be able to talk to them whether or not the forex market is open.
There are other minor points to check out when choosing a forex broker. If I missed an important point, please let me know in the comments. Don’t forget to subscribe up above to my mailing list to get my upcoming ebook. You will be thankful.
To your trading success!
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Do any US Brokers not have FIFO? I don’t mind not being able to hedge but come on really first in first out?