Why are traders always searching forex brokers?
The search for forex brokers is probably something that most forex traders do on a regular basis. This is somewhat akin to searching for the "Holy Grail" trading system. Most traders, especially those who are beginners, often end up in this cycle, jumping from one forex broker to another and looking for the next best trading system with which they can make money.
So what are the reasons behind traders always searching for forex brokers and what are the reasons behind that?
Let's take a look at some of the most common reasons.
The newbie trap
We all learn by experience and trading isn't that different. In most cases newbie forex traders tend to sign up with the first broker that they come across. This is often done without doing any proper research about the forex broker.
We know that there are regulated forex brokers as well as off shore unregulated forex brokers. One of the biggest factors that attract beginner traders to a forex broker is the bonuses and the market campaigns.
The fact that forex brokers advertise trading as something that can make them money for a vacation or for travel can be quite a tempting factor.
Once a trader deposits funds with a broker without fully researching into them, sooner or later they will realize that the trading conditions are quite constrained. Factors such as fixed spreads, restrictions on news trading and so on will eventually make the newbie trader to realize that all is not what it seems.
Incorrect leverage and deposit amounts
When a trader does not have enough knowledge about leverage and the adequate deposit requirements, it can often lead to quick losses. This happens because for the most part, the trader tends to focus on the lure of making a big profit. Quite often, they end up ignoring the most basic but important aspects such as choosing the right leverage.
Most traders randomly choose a leverage ratio without paying much attention. For example with a $100 deposit and a 1:1000 leverage, the trader can expect to make profits.
However, all it takes is just a few losses and mismanagement of funds for the trading equity to be erased.
In most cases, traders simply leave their broker and continue to hunt for the next best forex broker.
Bonuses and promotions
Bonuses and promotions are one of the most common ways used by forex brokers to attract new customers. Quite often, traders with no experience think that using the additional funds, they can quickly turn a profit.
The truth of the matter is that although these additional bonuses can help the trader to increase their equity, there are also big restrictions. The restrictions are put in place so that traders need to meet the minimum volume requirements.
In most cases, the volume requirements can be big. For example, to get a $100 bonus released into their trading equity, a trader will need to make a volume of 100 lots.
With a small deposit and leverage, this can be next to impossible for newbie traders to make any profit, let alone hit the volume requirements.
Trading conditions are also one of the factors behind traders looking for a new forex broker. For example, over time the trader might develop interest in new markets such as CFD’s or metals. Chances are that these instruments are not already available with the existing broker.
As a result, the trader eventually tends to move to another forex broker that can offer them the opportunity to explore bigger markets.
The spreads or commissions and swaps can also play a role. Over a period of time as the trader begins to understand how the forex markets work, they will realize that the trading conditions they get aren’t that competitive.
This can lead the forex trader into looking for greener pastures.
No matter how one looks at it, the basic reason why many traders continue to search for a forex broker is the effort to find the broker that can support the trader’s requirements. The requirements can vary, from something as simple as bonus conditions, to something more detailed such as trading conditions and the markets available for trading.
Almost all forex traders have gone through this cycle and it isn’t something that a trader should be too concerned about. As you keep hopping from one forex broker to another, the important fact is to ensure that you know what you want.
Once a trader beings to grow and with experience, they will eventually figure out the right forex broker that will suit their trading style and trading requirements.