NO14 - 6 Crucial Things to Consider When Choosing a Forex Broker

"Having the right kind of a forex broker is all the difference between a successful trading journey and an unsuccessful one. Due to the sheer magnitude of forex trading, there are many forex brokers available now a days. It can get confusing when choosing a forex broker because there are too many choices. Therefore, it is important that you as a trader conduct your due diligence before you choose a forex broker. But how do you do that and what are the things to look for when choosing a forex broker? In this article, we point you in the right direction by showing you six most important things that you should bear in mind when choosing a forex broker. Start off on the right foot and focus on these six things alongside other factors that are individual in nature in order to have the right forex broker that you can trade from."

Your first step in forex trading, after you have learned the tricks and tips of the basics of forex trading is searching for a forex broker. Having the right forex broker is important because you will be trading long term with the forex broker.

It is not recommended that you change your forex brokers half way through. It is expensive and can be quite a daunting task. So to help you make the right choice, here are six things that you should remember when choosing a forex broker.

1. Is the forex broker regulated?

It is common to come across forex brokers who are not at all transparent. This can lead to the forex broker charging you fees or shaving off a few pips from the profits. A regulated forex broker is required by law to adhere to certain business practices. These include being subject to regular audits of the trades as well as a review of the forex broker’s financial standing.

A regulated forex broker offers a higher sense of security for the trader compared to an unregulated forex broker. A forex regulator is basically a government appointed institution which oversees the integrity of the financial markets.

2. The forex broker’s execution model

In the previous two articles, we covered the concept of how trades are executed and the two main types of forex brokers that you will find. This is should be something that you should consider when choosing a forex broker. There is no right execution model and both, dealing desk and non-dealing desk brokers have their own pros and cons. As a trader you need to decide for yourself which of these two execution models is ideal for you.

Remember that not all traders are created equally, and each has their own individual needs. By understanding which type of a forex broker’s execution model, you would be able to build a long-term relationship with your broker.

3. Trading conditions

Trading conditions are important to you as a trader. The trading conditions basically determines how much you will be paying in terms of the trading fee (spread or commission or both) and also the terms of the trade.

For example, some brokers do not allow strategies such as scalping or hedging. It is important to understand the terms even before you open a trading account with a potential forex broker.

Besides the trading fees and commissions, you should also pay attention to the overnight swap rates that are charged. These are fees that are either credited or debited to your account depending on whether you are long or short on a currency pair. These fees tend to vary from one broker to another.

4. Choice of instruments to trade

Many forex brokers obviously offer you a wide range of currencies to trade. However, besides currencies, you should also look at other instruments that the forex broker is offering.

Typically, forex brokers offer additional securities such as CFD’s on commodities such as Crude Oil, Gold, Silver and Natural gas. In some instances, the forex broker can also allow additional trading instruments such as stock CFD’s, index CFD’s and so on.

Although you might not be trading all these instruments, as you progress as a trader, there are times when you might want to use the inter-market relationship to hedge your positions. Thus, keeping the long-term prospects in mind, you should do your due diligence at the first step itself.

5. Deposit and withdrawal options

Banking is also an important aspect you should bear in mind. Many traders often do not charge any fee on deposits but put up costs when it comes to withdrawing of funds. Under such circumstances, you should explore the various deposit and withdrawal options.

Besides bank wire transfers, now a days, forex brokers allow other deposit and withdrawal methods such as using a debit card, eWallet payment system and so on. These deposit and withdrawal options helps you to cut down on transaction fees and are much faster than the traditional bank deposit and withdrawals. This can help you to quickly fund your account if need be and also allow you to easily access your funds as well.

6. Trading platforms

Having a choice of trading platforms is also essential. If you are choosing a forex broker, chances are that you will be using the MT4 or the MT5 trading platforms. These trading platforms are available free of cost and you can access them as a desktop version, web and mobile trading apps.

But besides the standard forex trading platforms, you also have other platforms such as cTrader, Ninjatrader and so on. You need to check out the trading platform so you gain familiarity with the platform and also search for a forex broker who offers the appropriate versions of the forex trading platform that suits your requirements.

Read 852 times Last modified on Sunday, 12 May 2019 07:10