With the increase in the popularity and success of forex trading there has been an equal increase in the number of forex brokers all competing to get you to open a trading account with them. But how do you go about finding the right broker for you? This is a question that many new trades may struggle with and even seasoned traders may at times need to change brokers as they may be receiving substandard services.
So today I want to share some tips that will help you choose a good forex broker or compare your current broker and see how they rank when compared against these tips.
Essential of a trusted broker
There are a number of critical factors that determine how safe your money is in the hands of your broker. These are Broker’s reputation, Broker funding, Broker’s country, Regulation
a) Broker’s Reputation
There is a saying that goes ‘where there is smoke there is fire’ a lot of times this saying holds true where forex brokers are concerned. Brokers with bad reputations will usually have resulted from poor customer service and when you are selecting a broker you need to do a search for the reputation of the broker to check for possible complaints.
While conflicts with brokers will happen to many brokers too many complaints can be a bad sign and you need to steer clear of such a broker especially where the complaints involve difficulty in withdrawing funds.
b) Broker funding
You want to select a broker with a solid financial backing as this greatly affects the financial security of the broker. Usually the broker should have a trusted owner or well funded parent company that will help ensure that client funds are protected in case of anything.
Also client funds should be held in separate tier 1 bank accounts which increase the safety of your funds.
Details of the brokers funding can be obtained from the broker’s website or press releases that they may have put out. You may also check the broker’s regulator website as usually such regulators will list statistics on their members which includes financial details
c) Broker’s country of registration
You want to choose a forex broker registered in a country with strong and well developed financial regulation this can be especially important since such countries have strong legal frameworks that would be of great help to you if you need to get back your money when problems arise.
While forex brokers in smaller countries like Bahamas or Panama may offer very lucrative terms to entice account holders they may end up causing you problems in the future due to lack of a strong regulation in such areas.
Before you send money to a broker make sure you check their address and the country they are registered in. You can also confirm this by checking the regulator’s website in that country for a list of licensed brokers to see if your desired broker is listed among them.
When looking to open a forex account it is a good idea to choose a broker that is registered with a regulatory agency as regulators will usually have a certain set number of conditions that the brokers must meet before they are licensed to offer such services in an area.
It is also means that you have some protection and way out in case the broker files for bankruptcy or has problems that may put your funds at risk.
Essential services of a trusted broker
Once you have determined which broker you will trade with you may also want to look at these essential services from them.
i) Trading platform offered
You need to find out the trading platform offered by your forex broker and how it works. Is it proprietary? or do you have to download it do they support Metatrader4 , one of the most widely used platforms in the market.
Will you need to make trades from your mobile device? Check if your broker supports trading from mobile devices. This will affect how effectively you are able to trade.
ii) Spread margins
Depending on your trading strategy you may also want to look at the spread margins offered by your fx broker. Generally brokers with tighter spreads are better as they will help you as a trader save money.
iii) Customer support
The forex market operates for 24 hours a day over the 6 trading days of the week so you need to choose a broker that can give you support for your chosen trading hours depending on where in the world you live. The most ideal situation is where you get a broker in your region or same times zone so you are assured of favourable support hours or one that offers 24 hour support.
You can also try out the customer support offered by your broker by placing a test support call to see how they handle you, if you are put on hold, how long it takes you to get through .e.t.c
iv) Order execution
How fast your broker is able to execute your orders is of critical importance as it could mean the difference between a profit or a loss to your account. You want to choose a broker with very fast order execution time.
Some brokers will offer you some sort of bonus for signing up with them for the first time or for being a loyal customer. While this is not as essential as the others above it is a great extra to look out for as you choose your broker.
These are some of the main things to look out for if you are looking to find a good forex broker. But always remember to read the terms and conditions of your broker before you open an account with them to make sure your trading strategy and methods do not violate any of their terms to avoid conflicts that may arise in the future.
You may also want to check out forex broker habits to watch out for.