Choosing a Forex broker is as important as knowing how to trade. This can be attributed to many factors the most notable being; a good broker will ensure you place and liquidate trades instantly. A good broker will also charge you reasonable commissions in the form of spreads and other charges/fees. A good broker will also guarantee the security of your account. These factors among many others are crucial to the success of any trader. When you consider other factors such as the presence of very many Forex brokers today, it’s easy to understand why you should choose a Forex broker wisely. This leads us to a very important question; how do you choose a Forex broker? Below are some important factors/tips to consider in an effort to help you answer this crucial question.
1. Consider regulatory compliance
Any Forex broker can claim to be a good broker however; the best Forex brokers have met all the necessary regulatory compliance and have proof of the same. For instance, all reputable Forex brokers in the U.S. have NFA (National Futures Association) and CFTC (U.S. Commodity Futures Trading Commission) membership as Futures Commission Merchants and Retail Foreign Exchange Dealers.
NFA and CFTC membership is a testament of compliance with the highest regulatory standards on a variety of issues ranging from protection from fraud to manipulation and other abusive practices. Forex brokers that are NFA members have a unique number stated on the broker’s website. The brokers also state the fact that they are subject to CFTC regulations. Considering regulatory compliance is one of the first and best ways of ensuring you choose a good Forex broker.
2. Choose a broker that offers competitive commission and spreads
Finding a Forex broker that is compliant isn’t enough. You need to go ahead and choose the one that offers the most competitive commission and spreads. This tip is important since the amount of commissions and spreads you pay will determine your overall profitability. Brokers make money from commissions and spreads (the difference between the bid price and ask price of a currency pair). A good Forex broker however considers their clients first. You should compare the commissions and spreads charged by the most popular Forex brokers to identify the broker that offers the most competitive rates.
3. Consider the ease of making deposits and withdrawals
Different Forex brokers have different account funding and withdrawal policies. The best Forex brokers however have flexible policies that allow clients to make deposits and withdrawals with ease regardless of the amount. You should settle for a broker that allows you to deposit as little as $50 to thousands of dollars anytime via all the popular and safe payment options online and offline.
4. Consider trading variety
You should also consider a broker that allows you to trade a variety of currency pairs as well as other financial instruments. The best Forex brokers offer a wide selection of currency pairs as well as customization options. In a nutshell, the broker you choose should be able to offer the currency pairs you are interested in as well as offer you other choices to consider in the future.
5. Choose a broker with a well-designed trading platform
It’s also important to consider the suitability of the trading platform you will use given the fact that Forex trading platforms act as investor’s portals to the Forex market. The Forex broker you choose should offer a trading platform that is easy to use and has a wide variety of both technical and fundamental analysis tools. The platform should also be visually pleasing to you and be well designed in general. A well designed platform has clear buttons that function properly. The importance of choosing a broker can’t be overemphasized given the fact that a poorly designed platform can lead to costly mistakes i.e. accidental shorts/longs.
6. Research on a broker’s customer reviews
This is the last most important tip to consider in this list. You can consider all the above tips but you still need to know what it actually feels to work with a certain broker in advance and the best way of doing this is considering customer reviews. The internet is packed with firsthand reviews by traders who have actually traded with most brokers out there. As a result, it shouldn’t be a problem knowing what it’s like to choose a certain broker from the firsthand accounts of past or present clients.
The above tips are the most important tips to consider when you want to identify the best Forex broker for you. As long as a broker has regulatory compliance, offers competitive commissions and spreads, offers ideal deposit and withdrawal options, offers a variety of currency pairs, has a well designed trading platform and past/present clients are happy with the broker, the broker will be good enough for you.