Given the growing number of options available, it is becoming increasingly difficult for a ‘newbie’ Forex trader to decide on a broker. In fact, the chances are pretty good that many new traders haven’t got a clue where to even begin. And, there is nothing wrong with that.
Listed below are three simple steps to help guide new or inexperienced traders in finding a broker that will best suit their needs.
Step 1: Know what to look for.
Prior to comparing or short listing potential brokers, you must first know what criteria to be mindful of. Here are a few questions to get you started:
- What regulating authorities is the broker registered with? If your broker of choice is stationed in America, you will want to confirm that they are registered with the Commodity Futures Trading Commission (CFTC) or the National Futures Association (NFA). UK-based brokers should be registered with the Financial Service Authority. Experienced traders think twice about signing up with unregulated brokers – you should too!
- Will the broker debit or credit daily rollover interest? Some deduct interest, others do both. Knowing these details are important to traders who hold positions overnight.
- Will the broker offer extra services like charting, market commentary or newsfeeds? If not, are these services important to you?
Step 2: Shop around for comparison
Online Forex broker review boards and forums are often the best place for newbies to start their search. These sites offer real-world advices, feedback and reviews from traders who have actually signed on with the brokers. Be mindful, however, of the reviews that are factual and those that are merely negative remarks from disgruntled traders.
When reading reviews, use your better judgement to determine if the reviewer has a valid complaint or if trader inexperience was to blame.
Step 3: Register for Free 'demo' accounts and ask a lot of questions
The final step to sourcing for the most suitable broker is to select, at minimum, two different brokers who each very closely meet your requirements and initiate the process to start demo accounts.
Attempt to trade in different markets and educate yourself on the various features of each trading platform. Do not be afraid to ask as many questions as possible – the feedback and responsiveness of the broker will also verify the broker’s willingness to communicate with their clients.