What You Need To Know When Looking For The Best Forex Brokers
Forex trading is very competitive so it only follows that there are many companies that want to be brokers. Learning forex can already be overwhelming, and now you also need to learn about brokers. However, choosing the right broker is crucial in your success as a forex trader. There is no way around it. You need them and they need clients. But you should also know that not all forex brokers are the same, and you cannot trust all of them. There are trustworthy brokers and there are those who will most likely rip you off.
If you are going to start forex trading and are looking for a broker, here are the things you need to know, aside from checking out this Engine Forex list:
- A trustworthy forex broker has regulatory compliance. Before you trust a company with your money, you need to make sure that they comply with regulatory agencies in their respective countries. Below are some of the agencies that the broker needs to be a member of in a specific country:
- USA – National Futures Association and the Commodity Futures Trading Commission
- Australia – Australian Securities and Investments Commission
- Germany – Bundesanstalt für Finanzdienstleistungsaufsicht (Federal Financial Supervisory Authority)
- UK – Financial Conduct Authority and the Prudential Regulation Authority
- Switzerland – Swiss Federal Banking Commission
- France – Autorité des Marchés Financiers (Authority of Financial Markets)
- Canada – Investment Industry Regulatory Organization of Canada
Being a member of the regulatory agency in their country means they abide by the rules and regulations as a forex broker. This protects you from fraud, shady business practices, and manipulation.
- Easy to navigate trading platform. When you are doing forex trading, most of your trading activities will be done on your broker’s trading platform. This means that the platform should be easy for you to navigate. There have been expert traders who have made mistakes because the trading platform is not user-friendly. A well-designed trading platform should be easy to use, aesthetically pleasing, and uses tools that users will not have a hard time figuring out how to operate. The buy and sell buttons need to be clear, and some great platforms even have a panic button that stops all of your trading activities at once.
When you choose a poorly designed trading platform, it could potentially cost you a lot of money. You could make mistakes with your entry. You could add a position instead of closing it.
For this reason, reputable forex brokers allow their clients to have a demo account before they open a real account and start trading. This will give them a feel of the platform before funding their account.
Also, a demo account will give you an idea about the platform’s response time. When you open or close a position, is the response time good or is there a slight delay? If the response time is too long, it may cost you a lot of money.
- Cost of transaction. All brokers will need you to pay a transaction cost. That is how they make money. When you are doing a trade, you will have to pay what they call commissions and spreads. If a broker is making money through commissions, the charge will be a specific percentage. The percentage depends entirely on the broker.
There are brokers that make money through a wider spread. A spread is the difference between the buying and selling price. A good indicator of a good broker is when the spread is no larger than 5 pips, especially for major currencies.
Now, not all brokers that have the lowest transaction cost can be trusted so you need to find a balance between having good security and a reasonable transaction cost.
- Great customer service. There is no perfect broker so you will need after-sales support every now and then. Note that this will not happen only once. You may need help because of a glitch in the system or you made an error that you want rectified. When this happens, you will want a broker company that has great customer service.
You can easily search on the internet for feedback about a broker’s customer service. You can find what you are looking for in forums. Aside from this, you can also call their customer support and get a feel of the personnel handling their after-sales. Ask questions about spreads or about the company. You will know if they will do everything they can to accommodate your questions and concerns.
In order to become a successful forex trader, there are many things that you need to learn. However, do not be discouraged because if thousands of people can do it, so can you. It just takes a lot of patience when you are learning, but when you’re starting to make money, it will all be worth it.