Basics of Finding the Best Forex Broker
Not only do you need a solid trading strategy, you also need a good forex broker to be successful in forex trading. If you are a beginner in forex trading, you should familiarize yourself with the basics of forex trading first. There are free trading platforms you can use to learn how to trade without using real money. Once you are comfortable, you can then begin trading with real money. A good forex broker will treat and help you trade like a professional despite the amount you trade or the experience you have.
How to Find the Best Forex Broker
First and foremost, you should find a forex broker that is willing to help you learn the basics of forex trading. It will be difficult for new traders to formulate a working trading strategy without learning the more technical aspects of forex trading. A good broker will offer you free tools for technical analysis and a charting package. Once you have chosen a trading strategy, you should verify that your broker’s charting package as the indicators and features you need to use your strategy.
Another important factor in choosing a good forex broker is the spread. The spread is the difference between the ask price and the bid. A good broker will offer a low spread meaning the trading is less expensive. Be aware that some spreads may be low but can dramatically increase on holidays or in response to breaking news.
You should also choose a broker with low trading amounts and minimums for opening accounts. This is important because you should only trade with money you can afford to lose so using a trader with lower minimums and trading amounts will allow you to feel comfortable trading. As you learn, you can gradually increase the amounts you trade. Trade sizes that brokers allow you to trade is important as well. Some brokers will only allow you to trade a large amount of units which means you need much more money to safely trade. Other brokers will allow you to trade single units at a time – so choose a broker that allows you to trade in your comfort level.
A broker should always follow your instructions. Do not choose a trader that constantly re-quotes you when you try to sell or buy as this can severely affect your profit. Brokers who have a large number of clients are generally less liquid and not able to quickly adapt to everyone’s trading situation.
Leverage is a very important aspect in choosing a broker. Leverage is basically when you borrow money for trading. For example, if you leveraged at 20:1, then you will trade twenty times the amount of money as you initially put forth. A good broker will not restrict you in the amount of leverage you use. Rather, they will encourage you to trade with however much leverage you feel comfortable with.
You should also know your broker’s margin call policy. You need to know if your broker will close your positions if your account’s asset percentage falls too low. Be sure to know about your broker’s interest and rollover fees. When you trade overnight you maybe receive a rollover fee and may also receive and interest charge. There are some brokers that will charge you interest every moment you have an open trade. You should know what kind of deposits your broker accepts like from debit or credit cards, PayPal, or some other type of transfer method.
If you are interested in mobile trading, be sure that your broker gives you trading tools that can be accessed from you mobile phone or tablet. Also, be sure that your broker is registered with the Commodity Futures Trading Commision, the National Futures Association, or the Financial Service Authority to ensure a reputable broker.
Steps for Choosing a Forex Broker
You should know what you want to get out of your forex trading so you can find a broker that fits your style and trading goals.
Some basic questions to ask your broker are:
- What are your spreads.
- What tools and indicators do you use.
- What currency pairs will you trade.
- Do you have a commission.
- Do you use a particular trading platform.
- Do you want to hedge or scalp.
- Is there a minimum investment I need to make.
- How do I transfer funds and what fees are associated with transfer.
- And what leverage and spread do you need or use.
Next you should use the reviews on this site to search for forex brokers. You should write down which ones you are interested in and visit their websites. Be sure to understand their specific rules and policies before you begin using them for your forex trading. Also be sure to verify that there business dealings are transparent like information on the regulatory bodies that oversee them and customer service information. Their website should also have a certain appearance. It should be orderly, fully functional, easily understood, readable, and professional. Once you have narrowed down your list of brokers, be sure to verify that they are overseen by a regulatory body. These regulatory bodies vary from country to country so make certain your broker is part of one that is in your country.
Finally, you should read reviews about all the brokers you are still interested in. Many reviews can be biased and not based on fact but on bitter feelings of loss that was not the broker’s fault. Some simple rules can be used to sort out the truth of these reviews. If the broker has been in business for over ten years, you can be sure that they understand the industry well or they would not have survived. Another piece of information you should look for is if they are regulated by any entity in your country. If they are, you can infer they want to be ethical and honest in their business practices. If a broker offers you more than just a trading product then you know the broker is involved in a larger business and has more clients and responsibilities.