October 16, 2017
With so many different forex brokers out there, it can be a difficult task for traders to go through all the offers and select the best forex broker for their needs. Let’s discuss some major points that traders should pay attention to when picking a broker.
The main point when choosing a forex broker is security. You want to deposit your money only with a secure broker, and avoid bucket shops and scams which we will discuss in the next article.
To check the security of a forex broker, you need first to find out how the broker is regulated. They will usually list the regulatory body on their website.
There are many regulatory bodies out there, and below is a list of the main regulators in the forex industry.
- Cyprus: Cyprus Securities and Exchange Commission (CySEC)
- United States: National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC)
- United Kingdom: Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)
- Australia: Australian Securities and Investment Commission (ASIC)
- Switzerland: Swiss Federal Banking Commission (SFBC)
- Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
- France: Autorité des Marchés Financiers (AMF)
- Canada: Autorité des Marchés Financiers (AMF)
You need to make sure that your broker of choice is regulated by one of the bodies above.
When opening a position, you will always have to pay for the transaction cost. Naturally, that’s why you want to find a broker with the lowest spread and commission.
But, be aware that the cheapest broker is not always the best. As said above, the foremost characteristic of a broker is security, and non-regulated brokers will usually try to attract customers by offering lower spreads than the competition.
That’s why you need to find a balance between low transaction costs, and broker reliability.
Deposit and Withdrawal
Before opening an account with a broker, find some reviews on the internet to make sure that the process of deposit and withdrawal is fast and without problems.
Brokers only hold your funds to facilitate trading, and that’s why there is no reason for them to make it difficult to withdraw your profits.
This is the place where you will spend the majority of your time while trading. Brokers offer various trading platforms, from in-house solutions to popular trading platforms like the MetaTrader.
Whichever you choose, make sure that it’s reliable, fast and user-friendly. Also, look for the additional functionality like news feeds, charting tools and other. Trading platforms should suit your needs to make trading easier.
Fast trade execution is very important in forex trading, especially if you are a scalper (a trader who prefers to make many short-term daily trades.) If the market conditions and liquidity are normal, your broker should fill your order at the price you see when you click the buy or sell button. It’s also very important that you have a stable and fast internet connection to communicate with the broker’s trading platform.
Test Your Knowledge: What to Consider Before Choosing a Broker
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What to Consider Before Choosing a Broker
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Question 1 of 2
Which of the following is NOT a main regulator in the Forex industry?Correct
Question 2 of 2
Opening a personal account and opening a business account are the 2 main account options you could open with a broker.Correct