Forex is a global market that operates 24 hours a day and brews over $4 trillion a day. It is also a market where thousands of investors come to exchange currencies, hoping that these operations will bring them profit. But to complete transactions, they need to go through an intermediary. This intermediary is the Forex broker, an essential part of the chain that allows this global market to function. As a Forex trader, you must therefore be completely sure of your Forex broker’s quality of services before choosing a Forex broker. Here is how to choose a Forex broker checklist that will help you to find the one that suits you best.
How to Choose a Forex Broker Checklist
1. Broker’s Regulatory Status
The question of how to choose a good Forex broker is basically the question of how to choose a broker for Forex and be sure the money you have deposited will not vanish. The first precaution is, therefore, to check that the broker is subject to legislation when you trade. To do this, you will need to check whether it is regulated and whether it operates off-shore. Go to the website of the financial market authority to verify that it is not on the blacklist of unauthorized brokers.
Normally, your broker does not collect the money you deposit in your account. It is actually deposited with a third party establishment, a bank, generally. Which is responsible for guaranteeing its availability. A licensed and regulated broker also benefits from the bank guarantee fund, which assures you, in the event of bankruptcy, that you will remain the owner of your funds and that you can dispose of them at any time.
2. The Quality of a Trading Platform
When choosing a Forex broker you have to check the quality of the platform: is it practical, is it slow, how are you trading on a demo account? Then you have to look at the costs. Many brokers offer an immediate opening of the account, followed by a first deposit, through more or less known payment methods. It is necessary to inquire immediately about the conditions of a withdrawal of funds. In some cases, these withdrawals are accompanied by high fees or unbearable delays. Besides, the use of the account may be subject to special commissions.
It is, therefore, necessary to review all the costs associated with your Forex activity. These can include financing costs, rollover costs, level of spreads without forgetting the fixed flat-rate commissions. These include withdrawal costs, closing costs and even sometimes the inactivity fees. You should know that some brokers “punish” their clients when they notice the absence of transactions within 30-60 days.
Also, pay attention to the difference in trade conditions between demo accounts and real accounts. Some brokers thus offer very interesting trading conditions on their demo accounts, but apply a completely different policy to their real accounts.
3. Pricing Conditions
The pricing conditions of a broker are not fixed by decree. They are determined freely according to their commercial objective and the level of competition. For example, sHome may add fixed commissions (or very high minimums) to all transactions, others may not. You have to be particularly vigilant. There are many ways to charge the customer: transaction fees, spreads, account management fees.
Make sure to be cautious especially towards brokers who post zero spreads and welcome bonuses that are too high. Fortunately, this is not the most common case. Forex brokers generally earn their money from the transaction fees and spreads they display.
But here too, you have to be cautious while choosing a Forex broker. The higher the spread (the difference between a currency for buying and selling), the greater the broker’s remuneration will be. Yet some are showing low spreads. But they can vary over time. These flexible spreads can appear attractive at first glance. Then suddenly they can deviate when the broker has detected greater volatility or a sudden interest in the market for a particular currency. Brokers also offer a choice of fixed spread accounts and variable spread accounts.
4. Forex Brokers’ Customer Reviews
Last but not least: testimonials from former clients. They are crucial since they offer a great source of information that covers all you need to take into account when choosing a Forex broker. Their feedback is essential in understanding the way Forex brokers operate. Moreover, a broker who has several satisfied clients is theoretically more serious and reliable than one who has the most derogatory comments. Forex broker reviews should be your cornerstone when you start trading Forex.