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How to find the best Forex broker ?

June 23, 2016
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The success of your trading business largely depends on the forex broker you choose. Depending on the country you live in, there will be hundreds or even thousands of forex brokers offering similar services. For newbie traders, it can be confusing and you just can’t sign up with the first broker you see. You need to compare multiple brokers to find one suitable for your needs. Some brokers offer forex trading services exclusively for traders with a larger investment capital. Finding the right broker will greatly help you to maximize the benefits while minimizing the risks

    • Understand your needs

Forex trading is all about trading currency pairs. You buy one currency and sell another currency and cash in profits based on the difference in exchange rates between the currencies. To choose the forex broker, you must first understand and list out your needs. Determine the currency pairs you wish to trade and choose a broker offering those pairs. Some brokers offer fixed and varied spreads. You should always choose a broker offering a lower spread. If you have a limited risk capital, choose a broker with a smaller minimum investment requirement. A higher leverage allows you to control more money and it significantly increases both your profit and loss potential. For newbie traders, the one-click trading feature is useful . Advanced users should look for additional features and services in their trading platform.

    • Research about different brokers

Once you understand your requirements, do an online search for brokers. Google will provide you with top rated brokers in the first page. Visit the website of each broker on the list and navigate through the website. The first thing you have to check is the compliance with regulatory bodies. Forex brokers registered in the US must be appropriately licensed by CFTC and NFA. Overseas brokers may be licensed by different regulatory bodies. It is better to avoid traders registered in tax havens because these countries allow forex brokers to operate with a license. Registration and licensing requirements demand the broker to follow ethical business practices. New forex brokers may have impressive websites, but choosing a forex broker with several years of experience is always a good idea. Pay attention to the commissions charged. When there is no commission per trade, read about the spreads and other fees.

    • Read reviews

Once you have shortlisted the brokers, read reviews about the brokers online. You should not trust the reviews completely though because some brokers notoriously leave excellent reviews for themselves. Read all the positive and negative reviews. Pay special attention to the reviews from real users so that you can understand the working policies of the broker. If some broker has red flags for withdrawal and trade execution, stay away from those brokers.

    • Product coverage

When you choose a forex broker, you should think about your long term goals. If you plan on expanding your investment portfolio to stocks and commodities later, you should choose a broker accordingly. This will allow you to use the same forex broker in the future if you wish to trade stocks and commodities. Several forex brokers make it possible for advanced traders to invest more money in commodities and stocks. However, the depth of coverage may be different.

    • Trading options

The forex broker you choose should provide accurate and reliable trade execution. The trades must be filled appropriately within the speculated time. Usually, brokers execute trades in two ways – market makers have their own dealing desks and STP brokers pass on your orders to interbank markets. Dealing desk brokers execute your trades directly and they usually provide fixed spreads. The Straight Through Processing (STP) brokers provide floating spreads and they don’t have control over the currency quotes. Some brokers offer re-quotes when they can’t execute your order in a volatile market. Re-quotes can sometimes work against your favor. You must always choose a broker who offers a guaranteed stop loss to minimize your losses. Forex market moves rapidly and you may lose your money in an instant. Brokers who provide negative balance protection guarantee that you won’t lose more than the money you have in your account.

    • Account types

The forex brokers accommodate different types of traders with various account options. These details can only be found on the terms and services page of the broker. Generally, brokers registered in countries other than USA and Japan offer multiple account types. All the brokers offer both demo and real accounts. You can test your trading strategies on the demo account using real-time data. You can only trade using real money when you deposit in the live account. Tiered account structure is not uncommon with forex brokers. You can easily upgrade your account type when you gain experience as a trader. VIP accounts have a higher deposit bonus and freebie offers because VIP members invest a large amount of money.

    • Trading platform

When you become a forex trader, you have to use the trading platform to place and execute trades. Metatrader 4 is the most common trading platform used by top rated forex brokers. MT4 is customizable to allow forex brokers to offer multiple additional services and features. Before creating a live account with a broker, you should test with a demo account to understand the features of the trading software. The user interface must be easy to navigate and you should be required to click just one button to execute a trade. When you want to trade using multiple accounts, you can use the multi-terminal software. Apart from web-based trading, some brokers allow for social trading where you can copy the trades of your peers. Mobile trading allows you to execute trades using your mobile phone.

    • Customer support

The forex broker you choose should provide you quick response so that you don’t miss profitable trading opportunities. Live support chat allows you to get answers to your queries instantly. If a broker is not willing to answer your questions immediately, then it is better to find another one that values your time.