How To Choose A Reliable Forex Broker That Is Right For You
Now that you are ready to trade, the next thing you need is a broker. So how to choose a Reliable Forex broker that is right for you?
Make sure you take some time to screen out the Forex Brokers in your short list and make some comparison to find one that is suitable and reliable that matches your trading style. There is no rush in opening your live account until you have done your homework because the market is always there and will not run away.
1. Is The Broker Registered With Any Regulating Body.
I’m not sure how many actually go into details when checking on those brokerage background. It does give you some sense of security and confidence in trading with them.
However, in my opinion, spread out your funds and do not put everything into one. Who knows which broker may go bust next? Big institution have gone down in the past…
2. Trading Platform.
One of the most important factor to consider during your selection would be the different type of trading platform the broker has. Some have their own trading platform, but by far the most popular platform is Meta Trader 4 or MT4 in short.
3. Trading Terms and Conditions
I highly recommend traders to read the fine prints of those agreement, terms and conditions and ask the broker’s customer service questions if in doubt. Do Not Assume!
If the answers to your questions are not explained to you clearly that you can understand, then that is a bigger doubt.
When in doubt, recommendation: Avoid!
Some brokers may bring up their trading terms and conditions against you only when you try to withdraw your profits. I know of one and it happened to me! You have been warned!
4. What Is The Minimum Trading Lot Size.
If you are new, you may want to start trading with micro or nano lot before going for bigger lot size just to test out the platform and make sure you spend enough time to familiarize with the trading platform.
5. Deposits and Withdrawals.
How easy or difficult is it to withdraw your funds? The deposit portion is usually easy, the brokers want you to trade with them!
However, when it comes to withdrawal, it could be a different story. Check out the withdrawal charges too, some brokers charge a lot higher than others.
6. Commissions, Fixed spread, Variable Spread.
Some broker offer tight spreads for popular pairs such as EURUSD, GBPUSD but take note that with most brokers, this tight spread can and will open up before and during news release such as US non-farm payroll and then go back to normal once the excitement is over. You have been warned!
You may want to open a live account, don’t deposit any money just yet and watch how much these spreads open up during news release to get a better idea on what you will be facing when you are actually trading.
Check out also the commission payable for ECN account, not all brokers charges are the same.
7. Dealing desk or No Dealing Desk (NDD) or ECN/STP broker?
I found the simplest explanation coming from FXCM, a broker that offers both dealing and no dealing desk account. They have a chart comparing both dealing desk and no dealing desk execution. It is listed under conflict of interest where with the dealing desk, they can profit from trading loss of their traders.
However, I must point out that I have trading accounts with different type of brokers and as long as they serve my needs, I don’t have any concern with what type of broker they are.
8. What Leverage Is Being Offered?
Some offer high leverage can work for or against you. It can wipe out your account pretty quick if your trades are going against you as it allows you to trade with bigger lot sizes. However, leverage is flexible and can be customized to your needs.
9. Which Time Zone Are You In?
Different brokers have their server time based in different time zone, so be sure to check them out and synchronize them with your trading clock. The different time zone will result in slightly different candle pattern in the 4 hour and day chart.
1o. Which Currency Pair Do You Want To Trade?
Not all brokers allow you to trade all currency pairs and the spread for each currency pair will differ from broker to broker.
11. Does The Broker Credit or Deduct Daily Rollover Interest?
This is important for those who hold positions overnight.
12. Customer Service.
I have to put this in because I have had bad experience with one. Check out their customer service. Chat with them, test them out and see if they are up to your expectations.
13. Check Out More Than One Broker.
Why more than one broker you may ask. We are being practical, nothing last forever and we prefer to spread our risk by putting our money with different brokers rather than just one and also check on their reliability at the same time.
If anything should happen to the broker you are using, your funds won’t be stuck and you will still be able to trade with other accounts with other brokers. Remember the black swan event on Jan 15, 2015 when the SNB decided to remove the CHF peg to the EUR? It wiped out a few brokers and even though they maybe segregated account, your money will still be stuck for awhile until the dust have settled before you can make a withdrawal.
Using the same strategy, trading manually or with an EA using the same settings and trading with different brokers WILL yield different results. Believe me, I have done plenty of test.
Before you rush off to open your live trading account, my recommendations is for you to pick 2 brokers that matches your selection criteria and open demo accounts to test them out first using the same strategy for both before you commit yourself with real money in your trading account.
Although the claim is demo account and almost similar to that of a live account since it’s taking the feed of the current market price and spread, you have to take note that demo and live account will not give you the same performance.
Don’t spend too much time in demo though because with a demo account, you are trading with virtual money and there’s no real emotion attached and you will also not able to see how different it performs as compared to a live account. Demo and Live trading are very different!
Once you are comfortable with it, go ahead and deposit a small amount of money to test out your first live account and see how it performs from there.
Hope this article on how to choose a reliable Forex broker helps you along in your selection.
Again there is no right and no wrong, it’s all about individual preference and you have to feel good about your choice.
Good luck and safe trading!
