Going with a Forex broker properly licensed and regulated in your particular jurisdiction is always important. But there’s a lot more to selecting your broker than that.
Yael Warman, Content Manager at Leverate, takes an interesting look at what factors traders should consider before choosing a Forex broker.
What should you Keep in Mind when Trading?
With new brokerages popping up everywhere, established ones consolidating, and bigger players expanding into new markets, how do you choose a broker?
Yael Warman, Leverate
When you look at a broker’s banner ad or website, the promise of them having your best interest at heart, of making huge profits at the drop of a hat and all those profits being deposited into your bank account almost magically, may be a driving factor on your decision-making process. What you should know however, is that overpromising and underdelivering is a sad reality of the FX industry and an MO that many brokers stand by.
Regulation is Key
You know how in real estate they say it’s all about location, location, location? Well, in FX trading the same is true for regulation, regulation, regulation. The internet is full of horror stories from traders who were taken for a ride by unregulated brokers. If you look at nothing else when selecting a broker, make sure you at least choose one which is regulated, preferably by a reputable authority. Being regulated means a brokerage must abide by a high standard of practice, meet certain capital requirements and handle traders’ funds as required by the law.
Not-so-Hidden Costs
Brokers will charge you in two basic ways: spread or commission. A lower cost however may not always mean that it will cost you less. A broker who offers low commission charges may have a higher slippage rate, which in the long run can cost you plenty. It is wise to ask about all transaction fees, whether the brokers do STP or are market makers, what the transaction fees are, deposit and withdrawal fees, requotes and other potential charges that while not obvious at first, you are bound to discover as you begin trading.
Unmixed and Unmingled
Regulated brokerages are obligated to keep traders’ fund separate from their operating costs. It is called segregation. You wouldn’t want your trading money to be used to pay for the broker’s electric bill now do you?
Where’s the dough?
You deposit money into your account, you make money, you decide you want to cash out… NOT! This is your money, isn’t it? You should be able to cash it out whenever you want. Well, some unregulated brokers will make you jump through hoops in order to get your money back. Make sure the broker you choose has a clear policy for fund withdrawal. Regulated brokers are obligated to return traders’ fund upon demand.
The Offering
Ask the broker what trading platforms they have available. Do they allow you to trade on mobile, web and tablet? Do they offer one-login and one-wallet for their various platforms? Ask what instruments they let you trade, what kind of leverage they allow you to get and if they can be integrated with EAs.
Customer and Tech Support
There may come a time in which you’ll want to speak to a human being. Does the broker you are thinking of signing up with offer technical support via telephone and live chat besides e-mail or an automated ticket system? Are they available 24 hours a day? Remember, the Forex marker trades 24 a day 5 days a week, so why wouldn’t your broker be available to help at all times?
Avoid sleepless nights worrying about your funds’ safety or the execution time you are getting and do your homework before you choose your Forex broker.