What Makes A Good Forex Broker?
The Forex market is a huge financial network and brokers make very important parts of the process. You will usually need a broker to penetrate the markets and track your trading. Your broker will also help you in important decision as far as the trading goes and can help you invest appropriately to get high returns. The good thing about this trading is that it is global and you therefore have the freedom of choosing a broker from any part of the world as long as you feel safe and comfortable letting them handle your investment.
As important as brokers are, not all of them have what it takes to bring you profits with every currency trade you do. It takes several good qualities and characteristics to make a reliable, knowledgeable Forex broker that will help you rise every way possible.
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Below are some of the most important things you should look for when selecting a Forex trader.
Low Spreads or Transaction Fees
Online Forex Trading Transaction costs are calculated in pips. The lower the better. Generally, spreads are currently between 2-5 pips on average. Be careful of forex brokers advertising 0 pip spreads. They are likely charging fees in some other way.
Leverage Options and Margin Requirements
Leverage can be a good thing, or a bad thing, depending on how you use it. Better brokers will have different leverage options, meaning a selection of leverage ratios. Perhaps a 400:1 leverage ratio is too high for you. Do they have a 200:1, or 100:1 option? You need a forex broker that can offer the leverage values you want.
Most online forex brokers pay interest on a trader's margin account. Keep in mind that most forex brokers do not allow you to accrue interest unless your margin requirement is at least 2% (50:1).
Quality of the Forex Broker
You want to make sure you have a quality broker. Forex brokers are not required to be registered or regulated with any agency, since the Forex market is labeled as an "unregulated" market. However, the better brokers will typically be registered as a Futures Commission Merchant (FMC) as well as being regulated by the Commodity Futures Trading Commission (CFTC) and a member of the National Futures Association (NFA).
Forex Brokers Trading Tools and Research
Better brokers have trading tools available for their account holders to aid them in their forex trading. Also, most brokers will have some form of research available or displayed directly on their trading site.
Online Forex Trading Platform
Most, if not all, Forex brokers allow trading over the Internet. The backbone of any online forex trading platform is their software system and as such is very important.
Forex Brokers Available Currency Pairs
Make sure that the prospective broker offers, at minimum, the eight major currencies (USD, AUD, CAD, CHF, EUR, GBP, JPY, and NZD).
Minimum Trading Size Requirement
The size of one lot may differ between forex brokers, spanning from 1,000 to 100,000 units. If you are only starting an account with a couple hundred dollars, you'll want to find a forex broker that allows mini lot trades.
Rollover Charges, Interest, or Swap Fees
Rollover refers to the process of closing open positions for today's value date and opening the same position for the next day's value date at a price reflecting the difference in interest rates between the two currencies. This is also known as Interest or Swap Fees.
Excellent financial background
It is very important that you take the time to check the asset base of the brokerage firm you choose to work with if at all your money is to be secure and safe. A reliable Forex broker should have an impressive asset base so they are able to last for the long haul and serve all your needs justly. Be very careful with whom you trust with your funds; a broker can make or break your investment, so go for one who has a financial background you can trust in.
Reliable trading platform
Forex trading will only be maximized when there is a Forex trading platform that is efficient enough and this is something that your Forex broker should be able to offer you. This is the platform that they will use to receive Forex news, trade, manage accounts and carry out any technical analysis. Considering how dynamic and volatile Forex markets are, the platform should in the least be responsive and quick. You should also get a demo account from your broker from where you can practice Forex trading to sharpen you and make you a little independent handling your investment.
Trading account that is user friendly
Trading accounts can come with features such as available leverage, spreads offered, minimum deposits needed for account opening, minimum lot sizes you can trade and funds withdrawal. When thinking of a Forex broker, think along the lines of how accessible your account will be to you. In essence, you should be able to access it and even retrieve your money when you want. Do not let your Forex broker be in full control of your account.
Reliable customer service
Almost nothing is as valuable as good customer service, especially with online forex trading. Even if you don't use it, you should have access to some minimum service requirements. Does the Forex broker have 24-hour support? Can you contact them by phone? Email? Chat? When you talk to them, do the people seem knowledgeable? A word of caution... service might be better before you open and fund a real money account. If you find that to be the case, withdraw your money and move on to a new forex broker.
Forex brokers are very important elements in Forex trading. To have a smooth experience with your trading, ensure that you start off with a broker you can fully trust to deliver beyond your expectations.