How to choose a forex broker is one of the most critical aspects that can define the success of a forex trader. While there are many forex brokers available in the market, without having a logical approach in choosing a forex broker, most forex traders could potentially end up with a wrong forex broker. Today’s forex market is almost saturated with different types of forex brokers.
While there is no right or wrong forex broker, the important aspect to choose a forex broker is purely subjective. Meaning that a forex trader A would feel that a forex broker A would be ideal for them, however it might not be the same story for a forex trader B. Bear in mind that forex trading is indeed personal and despite the general rules laid out, each forex trader brings with them their own custom trading styles, strategies as well as trading periods or times.
It must be understood that not all forex brokers are created equally although it might seem so atleast on the face of it. There are various factors that need to be considered when choosing the right forex broker. This process is more of a match making, so to speak. The forex industry is such that you build relationship with your forex broker over time and isn’t a kind of a financial product that you can switch brokers every other month. By due diligence and the right approach put in place when choosing a forex broker, you could very well cement your relationship with a forex broker that fits perfectly with your trading style.
How to choose a forex broker that is right for you?
There are many factors to consider when looking for a right forex broker. Here are some of the things a trader should look out for when choosing the right forex broker.
How to choose a forex broker – Regulation
While most forex related sites put aside the non regulated forex brokers, the truth is that there are many successful forex brokers who are non regulated. Bear in mind that in order for a forex broker to be regulated there are lots of financial requirements as well as lots of paperwork to be put in place. Also getting a license is not an overnight task and can take up to 6 months on average. Thus most forex brokers start off as non regulated during the process of having their license being approved.
One common myth that comes with trading with a non regulated forex broker is the security of funds. While there are indeed a few forex brokers who are dodgy, a majority of non regulated forex brokers try extra hard to bring the transparency to the table. The forex markets are a long term prospects and truth be told, there is money to be made by everyone including the forex broker as well. Except for the few non regulated forex brokers who wish to make a quick (but small) profits do engage in practices such as quote adjustments and so on, a majority of forex brokers are just as transparent and honest, if not more, than your regulated forex brokers.
ForexPromos.com has a strict criteria when it comes to promoting forex brokers. Our forex broker reviews has comparisons of both regulated and non regulated forex brokers. The intial compliance put in place before accepting to promote a forex broker means that visitors to Forexpromos.com can be rest assured that the forex broker they choose from Forexpromos.com are definitely one of the best in the industry, regulated or not.
How to choose a forex broker – Commissions, Spreads & Terms
The second important factor to consider in how to choose a forex broker is based on the commissions or the spreads that they charge. In brief, a commission is a percentage of your trades where as the spread is the difference between the bid and ask price.
The amount of commissions you pay on your trades can add up to a significant amount based on your trading styles, which is why factors such as fixed or variable spreads play such an important role. As an example, if you were a forex scalper and usually trade the new, the markets tend to move quite a bit, trading with a variable spreads under these conditions might not be to your advantage similarly trading during non peak hours on a fixed spread isn’t that smart either.
Usually more details on the trading terms such as policies on scalping, the margin available and so on are found on the trader’s terms and conditions page, while this section can get lengthy it does pay off if you spend time reading through the terms of service of a forex broker before you start trading with them.
How to choose a forex broker – Platforms, Services
The next factor to consider is the type of forex trading platforms available. While MT4 is relatively popular with over 80% of the forex brokers, there are yet a few other types of forex trading platforms that are widely used. Further more each type of account can also be tied up to a specific trading platform, which must be given due thought. So if a forex broker offers the right trading conditions for you but falls flat in regards to a forex trading platform that you are comfortable with, it makes no sense to trade with that particular forex broker.
Most MT4’s come with a default set of forex indicators that is fairly sufficient for most beginner forex traders. For the experienced traders, do check with your forex broker as they offer free indicators and signals service that is usually a paid for service.
How to choose a forex broker – Value added services
As the forex markets keep getting competitive, more and more forex brokers have started adding value added benefits to their trading accounts. Services include free VPS, additional forex signals via SMS or email, developing custom EA’s for your trading styles and so on. While the value added services doesn’t rank high for a forex trader, it does help to further your chances of profiting from forex trading.
Choosing a forex broker to trade with
To conclude, as a forex trader one should always take into account the complete package being offered besides only the spreads or leverage. In summary, here’s a checklist on how to choose a forex broker.
- How long has the forex broker been in business
- Who manages the company and what are the experiences of the management team
- How many and what banks does the forex broker have a relationship with
- What are the terms and conditions for the liquidity guarantees
- Policies on Margin, Rollover, Scalping
- Types of trading platforms being offered by the forex broker
- Dealing desk or no dealing desk. Market maker or a ECN/STP broker
- Other means of trading besides the trading platforms (in case your internet connection is lost while your trade is still active)
- Back end reports, PL statements
- Access to a dedicated or a team in case of any billing, support, trading queries