Being a successful trader involves a lot of rules. That being said, the number one rule is always the same: Choose the best Forex broker.
The main issue here is that you have too many viable options. Go to any financial news website, and you’re bound to see dozens of broker ads. The solution is to look at your daily trading needs and find a brokerage that best suits them.
If you’re a new trader, choosing a Forex broker will be one of the most important decisions you’ll make. Here’s what you need to know to pick the best. So, keep reading to have a complete understanding of this topic.
Not sure how to get started? There are 3 things you need to keep in mind when choosing a Forex broker. They are the Regulation and Licenses of your broker, the Trading Platform, and the Account Features of your broker. Let’s keep going and learn some details about these 3 things.
Regulation and Licenses when choosing a Forex broker
Before making your sign on the dotted line, you’ll want to confirm that your broker of choice is reputable.
For starters, they should be a member of the National Futures Association (NFA). Having a flashy website isn’t a guarantee of the NFA membership. Take a look at their “About Us” page — most brokers provide their NFA member number there.
Is your broker situated outside of the United States? If so, keep in mind that all countries have their own regulatory bodies. To ensure the safety of your deposits, only open an account with brokers that are duly regulated.
Countries that have financial regulatory companies that promote the regulatory authority enforcement include Australia (ASIC), the Eurozone (Mifid and local regulators), India (SEBI), Japan (FSA and JSDA), Switzerland (FINMA), UK (FCA), and the USA (CFTC and SEC).
Forex Trading Platforms
The trading platform is your portal to the markets. This is why it’s essential to find a broker platform that contains all the tools you need.
The thing you should focus on is making sure you can enter and exit trades with ease. Your platform should have obvious buy/sell buttons and a panic button for closing all open positions. With a poorly designed UI, you could run into order entry mistakes.
Other considerations include trading alerts, automation options, and strategy builders. Depending on your needs, you may also want to take a look at the customization options. Fortunately, most Forex brokers offer free demo accounts for testing.
Most of the investors select the trading platform according to their taste. The best way to find the trading platform of your interest is by using the platforms that offer demo accounts. It seems many platforms offer a demo account that is free. This helps ensure the customers of their services. So, we definitely recommend that you try a demo account first before making your mind for any trading platform.
Try to choose the best trading platform whose features are visible, and you can rely on your broker easily. Also, check if your broker offers detailed chartered offers, multiple ranges of technical indicators, risk detection software such as detecting the loss percentage and stopping the order, etc. While all of these may be insignificant at first, they will later play an important role in ensuring that you will enjoy the benefits of profitable trading.
When it comes to how to choose a Forex broker, getting the right features makes all the difference.
Many brokers offer you access to leverage in your margin account. For instance, having 50:1 leverage means you could hold a position valued at $50,000 with an account size of $1,000. Some brokers offer leverage that goes as high as 200:1.
You can fund most Forex accounts with an initial deposit that’s as low as $50. Of course, your actual buying power will depend on your leverage. Most brokers offer different account types with varying initial deposit requirements.
Spread and Commission
A spread refers to the difference between the bid and asks of any Forex pair in Forex trading. If a broker doesn’t charge a commission, they’ll likely offer wider spreads. Make sure you understand how your Forex broker makes money before you go with them.
As a general rule, ECN brokers offer tighter spreads than OTC brokers. They usually make up for it by charging a fixed commission for each position. If you’re looking to open an ECN account, you can find your brokers here.
More on Choosing a Forex Broker
Choosing a Forex broker may be the most important trading decision you’ll make. The more confidence you have in your broker, the more time and analysis you’ll be able to devote to developing the right Forex strategy.
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Want to know more about how to find the best broker for Forex trading? Keep reading our Forex Brokers section!