What You Need To Know Before You Choose A Forex Broker

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Traders who take their first steps in the foreign exchange market often struggle with choosing the right Forex broker. In fact, making the right choice between the brokers is the key element for successful trading. Once you are sure about your broker and feel safe you have more time to think about trading strategies and analysis. The process of choosing the broker is pretty hard and confusing as there are dozens of overwhelming advertisements from forex brokers on almost any financial news website. We will try to help you by highlighting the main tips which will make choosing a broker much easier.

Account Features

Once you are sure that the broker is trustworthy, you need to start thinking about what it has to offer to you. Leverage and margin, initial deposit requirements, commissions and spread, and ease of deposits and withdrawals are the four most important areas to consider when you are choosing a broker.

Leverage and Margin

Leverage is the use of borrowed funds to increase your trading position and gives you more opportunities than what your cash balance would only give. In the past, it was possible for the brokers to offer leverage as high as 400:1. To say in more basic words it means that if you deposit, for example, 1000$ you would be able to control 400 000 in the Forex world. Using the leverage this high often destroyed traders’ accounts as they ended up in the dept.

 

Initial deposit requirements

Most of the brokers do not require a high amount of money for founding forex accounts. Most of the brokers offer micro, mini, and standard accounts to the traders. Your initial deposit can be as low as $50 which will give you control over more money by using the suitable leverage. This is the reason why Forex trading looks so good for new investors and beginner traders.

Regulatory Compliance

A broker’s reputation is the most important factor while committing to it and you should check it first. You should only open an account with the brokers that are regulated if you want your deposit to be safe. If you are looking for brokers in the United States, the trustworthy ones should be a member of the National Futures Association if they are trustworthy. The broker should be registered with the CFT Commission too.

 

It is also very important to find a website that will give you trusty information, for instance, ForexBrokersList.org, because some flashy websites may claim that the broker is a member of the National Futures Association or under the Commodity Futures Trading Commission regulation, but their information must not be trusted.

 

Commissions and Spreads

Spread basically is the difference between the ask and bid of a forex pair. If the broker takes commissions the trader may be charged by the distinct percentage of the spread. Many brokers do not charge commissions and make their money with wider spreads instead.

Currency Pairs

In fact, you can trade various currencies but only a few are worthy of attention as they get the majority of successful deals. Brokers may offer a wide variety of pairs but miss the one which you are most interested in as a trader. Until committing to the broker you need to check if it has the specific pair that you are looking for.

Trading Platform

The trading platform is one of the key factors to your success as it is the portal to the market. Most of the brokers offer the demo versions of the trading accounts to see whether the platform has everything you need or not.

You should make sure that the platform of the broker you are choosing comes with fundamental and technical analysis tools and that you can be entered and exited with ease. Order entry types, strategy builder, customization options, backtesting features, automated trading options, and trading alerts are also important.

Customer Service

Communication to the broker also is a very important element while choosing. Forex trading occurs a whole day and even at night. It is an ongoing process that continues for 24 hours and it is crucial to broker’s customer support be available anytime. It is also important to get a live person on the phone when you need it. The waiting time until you get someone to the phone is also an important factor as every minute may have a crucial impact on the deal. Make a quick call to a broker while you commit if you want to get a general idea about the customer service that the broker provides.