Choosing forex broker can take several weeks, since there is a variety of brokers to choose from these days and there are plenty of factors to consider and compare. What are the features and services that a trader should pay attention to?
10 Tips to Review and Choose Forex Brokers
While comparing and reviewing forex brokers, it is advisable to go over the following checklist:
First thing that might pop into your mind is why location of the broker is so important anyway? It’s online so why should you care where the actual physical address is?
Some traders feel more comfortable and safe to trade with a broker from highly regulated country. Having a broker in your country of residence gives a sense of security, ability to physically go to the office and to some extend a power to file a complaint or a legal action in case of broker mischief.
I personally have doubts regarding the location of the broker and don’t mind trading with brokers located in Cyprus, for example, instead of US. First of all, in most cases they offer better trading conditions. Secondly, some of them have European/Swiss registrations and only use Cyprus address probably to skip the heavy taxes! I dislike paying high taxes as well and therefore don’t see anything wrong with the location.
The only thing I do check is that the physical address is listed properly on the site of the broker. It is comprehensive, actually exists on the map and doesn’t belong to a toy factory or a sea food restaurant!
Regulation of the broker is something I would consider an important factor. You have better chance of survival by opening an account with a regulated broker which is under supervision of the appropriate authorities, such as:
· NFA, CFTC ( in USA)
· CIPF, OSC (in Canada)
· FSA (in UK, Sweden, Denmark, Japan)
· SFDF. ARIF, FINMA (in Switzerland)
· CNMV (in Spain)
· SFC (in Hong Kong)
· ASIC (in Australia)
· DMCC, DGCX, DFSA, ESCA (in Dubai)
· FFAJ (in Japan)
The above list doesn’t contain all of the regulatory bodies, so if you spot an “unidentified” abbreviation on a broker’s website, google it to check which country is responsible for keeping the broker on its best behavior!
3. Deposit and Withdrawal
When it comes to depositing and taking money out from your trading account, it is not only crucial to know which payment methods are available, but also how broker handles the withdrawal:
· Is there minimum payout requirement?
· Can you withdraw anytime or the withdrawals are processed once a month?
· How long does it take to get your money?
· In case you used the free bonus, what are the withdrawal conditions?
· Is there a withdrawal fee?
Each broker offers different set of payment methods, some of which are:
· Credit/Debit Card
· Wire Transfer
Cyberspace is full of potential crime scenes involving scam and fraud. It is important to find a broker that can withhold hacking attacks, fishing attempts and deal with fraud issues.
Above all, a trader himself should be responsible for his/her personal details. Avoid opening emails that contain a suspicious offers and clickable links.
For example, consider an email that offers a special bonus and a link which will supposedly take me to the broker site. In case of receiving such offer, make sure to go to the broker via the secure link that you have in your favorites or get in touch with the broker via email previously used to communicate with support. You can then ask the support whether the email offer is genuine or a fraud.
The basic rules to keep your identity safe are:
· Keep in mind that only your name, date of birth and address are enough for an internet criminal to take over your identity.
· Use privacy settings on social networking sites to block anyone you don’t know.
· Never access websites via links in emails.
· Create smart passwords with a combination of letters, numbers and symbols.
· Forex broker will never ask you for personal information such as passwords or security details of your trading account via email.
5. Free Demo Account
As a newbie in forex, you might want to practice those brilliant ideas before entering the real market. Most brokers offer free practice account, but in most cases for limited amount of time (on average, a month).
Check out whether trading conditions in demo account are similar to the real money account. You don’t want to trade an illusion and then have your heart broken the moment you step into a real world.
6. Minimum Deposit Requirements
How much money do you need to deposit in order to open an account? The values vary from $1 to $2,000 and it is up to you to make a decision.
Small minimum deposit requirement are great for mini accounts – the next best thing after practicing with demo. There are brokers that even offer cent trading. You can definitely improve your trading skills and at the same time lose the minimum! (Yes, in the beginning, be prepared to be a loser! There is nothing much you can do about it, but to gain experience).
7. Trading Platforms
With a wide variety of brokers come extensive options in Trading Platforms. One of the favorite among traders is MetaTrader 4, offered by many brokers. This is a download platform with powerful trading tools and charts.
MetaTrader 4 is not the only platform, though. There are plenty of download and web-based software you might find more user-friendly and suitable for your trading needs.
8. Trading Conditions
Basically, you want to find a broker with:
· Low Spread
That’s the difference between the sell quote and the buy quote, aka bid and ask price.
· Sufficient Leverage
1:200 sounds about right. Don’t go overboard with 1:500 or more, because high leverage increases both the potential profit and potential loss!
· Several Account Types
There is probably Mini and Standard accounts with different features and services available. Make sure to check each account option inside out!
9. Customer Support
You want a broker that provides customer and technical support during the market hours, aka 24/5, via email, phone and preferably online chat. You might have a question about order execution, a closed order or even a malfunction of the trading platform.
Before trading with a broker you might want to check the broker’s customer support ability and professionalism by getting in touch with them via available methods and asking questions. You can even write down their answers and check the correctness later on. Plus, you can experience the attitude of the representative and the willingness to solve the problem.
10. Charting Software
Last, but not least, a good charting service. Even some of the top-notch brokers do not provide good charting software.
Charting is very important and you need the whole nine yards of indicators in order to make the right trading decisions and make money.
There is of course an option of using third party charts, but it is highly disapproved, due to inconvenience and most probably a fee. Therefore, your best options is to find a forex broker tht offers good quality charting right from the start.