Choosing a Currency Broker
Sifting through a large number of brokers is tiring, and makes you restless since the Forex market is widely used and known. It is also one of the biggest competitive markets out there. Using a broker for all of your trading needs has its benefits, but it also has its downsides when trying to find the right one. This is true when you are not sure what to look for in a broker, and have little knowledge of the market.
There are a number of key points to keep in mind when looking into the quality of broker you’re looking for.
1. The Costs of Transactions
There are always going to be transaction costs when trading. This is not new, and it has always been the same. However, the amount of the transaction may differ. Every time you trade, there will be fees that incur for each transaction. You have to pay either a spread or a commission based on the trade. You want to ensure that you’re trading with the most affordable rates.
A sacrifice of a lower transaction for a reliable broker might need to be in order. You can review all of the available options after finding out if you need a tight spread or not, for the type of trading you would like to do. You want to ensure that you get the best security and lowest transaction costs to balance the difference between the two and save money in the long run.
2. Using and Knowing the Trading Platform
The broker’s trading platform is where all of the trading is done in the Forex trading field online. This is why the platform that they use for their Forex account must be user friendly and stable enough for you to use it without interruptions or scams. This is one thing you always want to look into when deciding on which broker to go through since you want to ensure their platform is the right one.
Some key points to look into on the platform include:
- Does the platform have easy to read & use charting and technical tools?
- Is there a free news feed for you to use?
- Do you have all the tools and proper information to trade properly over their platform?
3. Security and the Risks Involved
The broker you choose to go with should have the utmost secure server and position. Always verify the legitimacy of a broker before performing any financial transactions. You can check the credibility and security of working through certain brokers, fairly easy. This is because there are a number of agencies that can separate the bad from the good when it comes to brokers.
There are a number of companies in parts of the world that provide you with the basic information you need to know about a broker:
- United States of America: The Commodity Futures Trading Commission (CFTC), and the National Futures Association (NFA)
- United Kingdom: The Financial Services Authority (FSA)
- Australia: The Australian Securities and Investment Commission (ASIC)
- France: The Autorité des Marchés Financiers (AMF)
- Germany: The Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
- Switzerland: The Swiss Federal Banking Commission Company (SFBC)
You should always make sure the broker you’re thinking of going with is on one of these lists. You do not want to give them your money prior to knowing where they are from and what they are about.
4. Execution of their Trades
It is always mandatory that your broker lets you know the best possible price out there for each and every order that you place through them. If there are no news releases or surprising events that take place in the market, and under normal market conditions, having them let you know the prices is reasonable. There is no real reason for them not to disclose the prices. You should know the market price that is shown by the ‘buy’ or even the ‘sell’ button.
If you click the ‘buy’ button for 1.4000, you should then be prompted with the price or close to the price that it should be. This is using a stable internet connection with no interruptions. If you’re a scalper, then the speed that you fill orders in is very important and requires you to make the best deal that you can, as fast as possible. This is why a few pips in difference when it comes to the price can make it harder in the long run for you to win that specific trade.
5. Depositing and Withdrawing from the Account
A broker that is trustworthy, and does their job well, is one that allows you to deposit your funds and withdraw the earnings without making it a hassle. It should initially be a hassle-free process. The broker should not make it difficult for you to withdraw your earnings, and there is no reason for them to stop you from doing so. The only reason for them to hold the funds in the account is for them to facilitate the trading process.
The money is in the account for the broker to make trading easier and more convenient. This means you should be able to deposit and withdraw cash in a flash, if you have earned the money in the account. The broker should initially make the withdrawal process run smoothly and quickly.
6. The Customer Service that is Provided
The brokers out there have flaws and imperfections, but choosing the broker that works best for you is essential. You want to know that you can contact them, and get a hold of them any time there is a problem with the trading process.
Knowing that the broker is able to get over support issues or technical support is essential, since you need to ensure they are there and can help since that is what their job is. This is just as important as them making the trades for you. Brokers might be nice and very helpful in the beginning of the process, but they might also turn once you hire them, and after they receive your money and start trading. This can become a large problem.