Without a reliable Forex broker, trading is impossible. They are the link between traders and the financial markets, no matter which market you are trading. It also they who provide prices for buying or selling currency pairs and it is usually this ‘price’ that they compete with in order to sign up as many customers/traders as possible.
The amount of marketing tricks and the sheer volume of brokers out there are staggering and this is why it can be a difficult process to choose one, especially if you are a new trader. After all, most new traders simply want to get started but it is this rush to begin that a lot of brokers thrive on. With this in mind, below is a list of crucial elements people need to consider when choosing Forex brokers.
Promises of making money
Whether you make or lose profit is of no concern to the broker. They make money through the spread or commission on every transaction anyway. However, a new marketing trick has been employed by various brokers that promise you will make money if you use their platform. There is absolutely no meat behind this statement. Do not fall for this. The broker has no control of the market and they are certainly not an education body that teach Forex trading strategies. How you trade is up to you and should be based on what you have been taught in Forex training, not the broker.
Every reliable and honest Forex broker must be regulated. Regulatory bodies are there to protect traders from fraud or unworthy behaviour on their part. Without them, the broker could get away with anything. There are many regulatory bodies around the world but these are the majors within their respective countries:
UK – FCA (Financial Conduct Authority)
USA – National Futures Association (NFA) and Commodity Futures Trading commission (CFTC)
France – Autorite du Controle Prudentiel (ACP)
Italy – Commissione Nazionale per le Societa e la Borsa (CONSOB)
If your broker is within a country that is not listed above such as Cyprus or Gibraltar then you should investigate and conclude which regulatory bodies they should be registered with. It is also worth investigating the policies within the regulatory bodies to ensure a high quality.
This is paramount. There are many companies out there that will sell you their products but once you part with your money; the after-sales service is laughable. The same applies here. Ensure that the customer service department is competent and that they are trained to resolve trading solutions; not just technical platform problems.
Sometimes the price that you see is not the price that you get. If the market is volatile, the broker will display a price to buy or sell a currency pair despite not being able to fulfil that order. This is when entry is delayed and prices are re-quoted; meaning that you lose money through ‘slippage’.
No extra costs
You already pay for the spread and chances are that you are also being charged a commission fee. This is enough. Ensure that there are no extra costs such as inactivity fees implemented into your account.
You may have heard the terms ‘micro’ or ‘mini’ accounts being thrown around. All this jargon means is that the smaller the account the higher the cost. For example, if you open a micro account chances are that you can start trading with around $50 but the spreads are wide. However, if you open a mini account you can start trading with $200 but you will receive cheaper spreads.
The point is not to rush. Undertaking some serious research in the beginning can have a great impact on the relationship between yourself and the broker. Ideally, once you chose one you want to stay with one and not change every few months because of something ‘you did not know about’. There are many good Forex brokers around. It is up to you to locate one that is suitable for you.