Choosing a broker requires traders to first understand what kind of an investor they are and what their long-term trading goals are. Not all forex brokers are created equal, so you have to understand the market and their mode of operations too. Each broker has their own advantages and disadvantages. So, find one that can seamlessly support your trading style.
Having the support of a good forex broker is essential for long-term trading success. The forex market is decentralised, unlike other financial markets. It’s easy to encounter a lot of firms that make false promises or hide their fee schedules within legal jargon. This makes it necessary to do some homework before you open an account. Here are some tips to help you through.
Without doubt, the first criterion is whether a broker is regulated or not. This is important to ensure the safety of your funds and security of your transactions. A regulated broker will also be transparent about risks involved. For instance, UK FCA-regulated brokers follow the MiFID II guidelines, imposed by EU-based ESMA. This makes it mandatory for them to include consistent risk disclosures across all their communication channels.
Such brokers also have to maintain separate accounts for client funds and recruit capable and trained professionals top-down, to manage the firm and its activities. Choosing a regulated broker also means you get negative balance protection and compensation from the regulatory body, in case the broker goes bankrupt.
However, not all regulatory bodies might suit your trading style. For example, US-based regulatory agencies do not permit currency hedging strategies. So, learn about such restrictions before you decide.
There are a few different types of brokers in the forex market. Learn about their operation model and their pricing structure, which will impact your total profits.
These are some important factors to consider. Consider signing up with an ECN (Electronic Communications Network) broker, who will be route your orders directly to a pool of tier one liquidity providers. The electronic communications network consolidates bid/ask rates of the most prominent liquidity providers, consisting of banks and hedge funds. Everyone has access to the same price information and price manipulation is made difficult. ECN brokers also tend to offer the tightest spreads, which reduces the cost of trading.
Ensure that the broker enables easy deposits and withdrawals, whenever you want to. Each broker has their own policies to facilitate this. Check factors like:
Remember that you need to have easy access to your account, from anywhere in the world and at any time. This is an integral part of trading successfully.
Your broker needs to be committed to your success. Some brokers believe in educating traders, so that they can take informed decisions. Choose a broker that has a well-structured website with important information and a dedicated blog full of high-quality educational articles, from where you can enhance your knowledge, strategies and gain trading tips from time to time.
Look for free online resources like webinars, market reports, videos, e-books, tutorials and more. It would be ideal to learn strategies from experienced traders, and many brokers bring in trader coaches, mentors and experts, who conduct sessions from time to time.
When you are a beginner, you might face problems in accessing your terminal or your account. You will need a broker who has a dedicated customer service helpline that functions 24/5. You should be able to discuss technical issues or account related issues with experts you can rely on. It’s wise to check this service, while you practice on a demo account.
Many reputed brokers provide account managers, dedicated to servicing clients promptly. Live chat facilities, e-mail support and easy call-back options can be of great help.
Your trading platform will be the most powerful tool at your disposal for low-latency trade execution, comprehensive technical and fundamental analysis and risk management. So, it’s critical that you choose one of the best. MetaTrader 4 (MT4) and MetaTrader 5 (MT5) are now considered the standard for global forex trading.
Make sure that you can access these platforms and their extensive features, like charting tools, indicators and backtesters, even on your mobile device. Trading software should be easy to install, understand and operate. Ample instructional material need to be made available. An additional benefit would be the availability of all features on the platform in multiple languages, which can help you even if English isn’t your first language.
Look for the list of trading tools offered by your broker, to ease market analysis and trade execution. For instance, the MT4 Accelerator Pack can be integrated into the MT4 platform to provide several tools, such as:
These tools help traders gauge the market sentiment, conduct profitability analysis of their strategies, set price alerts and make risk-informed trading decisions.
In addition, consider reading reviews and ratings to know what past and current clients have to say about the broker’s services. Check their licenses to see which jurisdiction they fall under. A good broker can bring success as well as peace of mind, necessary to survive in the financial markets.