If your aim is to become a successful and profitable forex trader, one of the most important tasks you need to first achieve is find a trustworthy and efficient professional broker. A forex broker, also referred to as a currency trading broker or retail forex broker is an intermediary who buys and sells assets on your behalf for a commission. A forex broker can be an individual or a firm and it will provide you access to a trading platform for buying and selling foreign currencies.
In order to select the best possible forex broker for your forex transactions, you need to ensure the following characteristics are sufficiently in place:
- Security and regulation
It is essential that you only opt for a broker with a proven track record of high level of security. Security is essential since a lot of your money will be going through the broker and you need to ensure your financial investment is in good hands. Checking the security credibility of a forex broker isn’t always very difficult as there are regulatory bodies across the globe that separate trustworthy brokers from untrustworthy ones. Some of said regulatory bodies according to the countries they operate in include:
- UK: Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA)
- US: Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA)
- Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
- France: Autorité des Marchés Financiers (AMF)
- Australia: Australian Securities and Investment Commission (ASIC)
- Switzerland: Swiss Federal Banking Commission (SFBC)
A secured broker will be a member of at least one of the regulatory bodies mentioned above.
- Transaction costs
Trading in forex comes with certain fees which are also known as transaction costs. Regardless the broker you opt for, you will have to pay transaction fees at some point. The important thing is to opt for a broker that charges the lowest and most friendly rates per transaction. But there are times when you may have to sacrifice cheaper transaction costs in return for better services. This is because many reputable brokers tend to charge a higher commission on transactions. It’s vital you find a balance between security and low transaction costs.
- Professional website and competitive platform
The quality of a company’s website has come to be an important benchmark for measuring the effeteness and professionalism of an organization at a glance. The broker you opt for should have a website that makes you confident in the personality of the firm you are dealing with. For instance, the broker’s website should be fast, easy to navigate, secure, clutter free and professional looking, user friendly, and not prone to frequent crashes. It should also be able to easily provide answers to questions concerning the firm and its services.
The website which is the platform on which you will be performing trades should also offer features such as free news feed, and easy-to-use technical and charting tools. Like any other interface you make use of, the broker’s platform should provide an interface that enables you to fulfil your goals with ease and in as few steps as possible.
- Competitive Spreads
It is very essential that a forex broker be able to provide you with a competitive spread. You can ascertain the type of spread being offered by looking into what currency pairs are being traded on the broker’s platform and the buying and selling price differences. In an ideal scenario, the spread should be no more than five pips for major currencies such as USD/JPY, USD/CAD, EUR/USD, GBP/USD, SD/CHF, and AUD/USD.
- Convenient deposit and withdrawal
An effective forex broker will ensure that you can deposit and withdraw from the platform with ease. This is because the easier you can do this, the easier it will be for you to trade and withdraw your profits. The broker only holds your money for the purpose of trading so there should be no reason to make depositing or withdrawing earned profits difficult
The best possible broker will fill you at the best possible price for your orders. Your broker should in normal circumstances fill you at, or very close to, the market price seen at the time of “buying” or “selling”. Executing your trades at even slightly different prices can muck up your gains from a trade.
- Quick Response Time
Customer support is key to enjoying the use of any professional service. The customer support should not only be able to provide you assistance and informations as soon as possible, it should also be able to speedily verify and fulfil your requests with a minimal delay. You can verify the effectiveness of a broker’s customer support by first opening a demo account and testing out the platform. The test won’t provide you all the answers you want accurately but it is a good start going forward, especially in identifying the shortcomings and strong points of the broker
- Reasonable Leverage
The risks of trading with high leverage are just as significant as the perks. The leverage offered by a broker will go a long way in determining said broker’s appeal. Major brokers typically offer leverage ratios at about 100:1 and up to 400:1. The higher the leverage, the higher the broker’s risk. If a broker’s leverage seems too high or low for you, then it may be best to seek the services you need elsewhere
- Stop loss protection
A broker should offer this feature as it allows you to control your losses and ensure they do not exceed a certain amount. Many brokers offer this feature, but you need to ensure the broker of your choice offers it before signing up to trade with the broker
- Customer Service
Brokers are generally not perfect and you will likely run into hiccups from time to time. Which is why it is important you can get assistance from customer whenever you need it and as soon as you need. A broker’s customer service should be easily accessible through a variety of means ranging from call to emails or online chat. A broker who can’t provide effective and prompt customer service is likely to down the road cause you problems. To discover the truth about a broker’s customer service quality, look through their past customer reviews.
By ensuring a broker possesses the above characteristics, you will have an easier time finding a trustworthy trading partner.