Forex brokers are the necessary link to forex market, so once you decide to become a trader, you are doomed to long process of selecting the broker that not only suits you best, but doesn’t scam its’ traders. Almost every day, dozens New Forex Brokers is being born online. With the abundant variety of features and services promised, the trick is to find a broker that you can actually trust. All of them claim to be the best, and making the right decision is not an easy task. When Choosing Forex Broker, which characteristics an features you should look for and compare? What are ways to build a reliable relationship with a broker? How can you ensure the security much needed in forex trading?
How to Review Forex Brokers?
Each forex broker offers spreads (the so-called difference between the selling and the buying prices of a selected currency pair). The basic rule is – the lower the spread is, the better. However, for forex brokers the situation is reversed; since they get their commissions from spread, a higher spread is definitely better for any broker.
So, where is the comfort line where broker doesn’t feel underpaid and a trader doesn’t feel cheated? Generally, an excepted spread among traders doesn’t go over 5 pips. Anything that goes beyond that is suspicious and should be avoided.
On top of that, fixed spreads is your best option. The last thing a trader wants to see is a change in pip spread when you least expect it. So, bear in mind that some forex brokers have variable spreads, meaning that during busy market hours the spread goes so wide, that the only time you could actually profit is when the market goes bullish.
What happens otherwise? Here is a perfect scenario – in the middle of your highly-planned and seemingly profitable trade where you have placed stop loss at, let’s say 6 pips from your trading entry, the charts go wild and your loss has been reached within a blink of an eye. While you are shocked and unrealistically shaken up, the price goes back to the point of origin!
Solution to this disaster is simple – keep switching forex brokers until you find the one where unexpected stop loss hit dissolve. Once you find a decent broker, your chance of successful trade increases dramatically.
Moving on! Let’s examine forex broker’s available payment methods and hidden charges for withdrawing your account funds. Not all brokers charge, however some consider their transaction services worth a fee. On top of that, deposits and withdrawals have to be processed in a fast and smooth manner, meaning your forex broker should provide a secure online transaction and accept not only bank transfers, but also Paypal, Moneybookers or similar online payment services.
Speaking of withdrawal, once you which to get your money out of the account, there shouldn’t be any weird activity at all. And by weird, I mean a request for minimum amount of funds in your account at all times, or a lengthy authorization process or even a possibility of getting your account banned. Of course, this is extreme, and most brokers provide reliable services with acceptable terms and conditions. However, while you search for the perfect broker, it is wise to know what kind of beast might be luring on the net!
Next issue is leverage options. Leverage can be your best friend until it turns to your worst enemy! Surely to maximize your potential earnings, a broker with 200:1 leverage is the ideal option. How should you feel about higher leverage, such as, for example, 400:1? It is luring, however keep in mind that with 200:1 leverage a loss is just a slip... with 400:1 leverage the same fall is a suicide.
Regulated forex brokers are definitely much more reliable and stable. After all, there is a watchful eye of the regulating authority. Most registered forex brokers mention their regulator on the website. If, however, this information is unavailable for some reason, make sure to contact your broker and find out who is in charge.
Of course, regulation is not everything. Reputation among other traders is a very important fact. To find out what other traders think about a selected forex broker, try searching for forex broker reviews. There are sites that provide detailed broker reviews; you can also search forums and blog posts about the selected broker. Not everything written is reliable; however these forex broker reviews should give you some idea of other traders’ experiences.
Another overlooked issue is the speed with which your trading order is filled. Imagine having all set and you finally see the right moment to trade. The only thing that keeps you from profiting is the forex broker that doesn’t process your order within seconds. If there is noticeable and uncomfortable delay, move on to the next broker until you find the one that is actually worth the commissions you pay!
Lastly, your forex trading professionalism relies on a combination of three ingredients – you, good forex broker and forex market itself. You cannot control forex market, however to ensure your success, you can control the learning process and the selection of a broker. By eliminating laziness and a bad choice of forex broker, you forex career is destined to be a smooth ride.