Until a little more than a decade ago investing meant doing all your trading by phone. For every action, you had to call your broker and place an order. Online trading has changed all that and today you can manage every aspect of your trading right from the broker’s online trading platform. Simple, right? But the question is how to choose a Forex broker when there are so many choices on the net today. New traders are offered a huge variety of Forex brokers to choose from. So how do you choose? It all comes down to finding the broker that you think will best suit your needs. We are here to help you do just that.
Remember: there is no such thing as “the best Forex broker”. What you’re looking for is the best broker for your needs. By knowing the kind of trading experience you want to get, you can decide on the broker who is right for you.
In this article, we will try to make the selection process simpler and easier so you can focus on investment opportunities, rather than which online broker to trade with.
Table of Contents
- Main Parameters to Check Before Choosing a Good Forex Broker
- Additional parameters for choosing the best Forex Broker
Main Parameters to Check Before Choosing a Good Forex Broker
1. Regulations/ Licenses
We advise you to only choose brokers authorized and regulated by leading regulation authorities like CFTC, NFA, FSA.
Why? It indicates a broker’s reliability and will protect your money.
Plus500 and AvaTrade are good examples of fully regulated online brokers.
2. Easy to Use Forex Trading Platform
Online Forex trading needs to be simple, intuitive, and easy to trade. A good User Interface is important.
eToro has the best Forex trading platform in the industry for beginners.
3. Customer Support
This is a key point. Good and efficient support is a must because you are probably going to use it.
We advise you to communicate a bit with brokers’ customer service reps before depositing.
Ask a few questions by mail or over the phone before opening an account.
Get a feeling for the speed of service as well as its quality and availability.
eToro, 4XP, and FXCM all provide fast, high-quality support.
4. Leverage Options
Different Forex brokers offer different leverages.
The higher the leverage you use, the more profit you can potentially make, but the higher risk you will take also.
That’s why there is no best level of leverage, it depends on your trading style.
Some brokers offer up to x100, x200, and even more in some cases.
5. First Deposit Bonus
Each broker wants to attract you with high capital bonuses on your first deposit.
In this case, you get extra money to trade with. A few brokers are offering great starting bonuses. One example is AvaTrade’s offer of up to 100%. eToro also runs some very attractive promotions.
6. Deposits and withdrawals
You need to pay attention to the broker policy regarding withdrawals.
Check out the waiting time for your withdrawals and other written policies.
7. Trading Costs
Brokers make money through the fees traders pay. A significant source of revenue (for your broker) and operating expense (for you – the trader) will be the spread –
the price difference between the bid and ask prices.
Know how your broker handles spreads:
- Are spreads fixed or variable?
- What is the average (and MAX) spread for each of the currency pairs you plan to trade?
- What are the spreads during times of high volatility?
- Are there commissions per trade, in addition to the spread. FXCM and eToro all offer fixed spreads.
8. Demo Account
Have you ever bought a car without taking it for a test drive, first? We certainly hope not.
Likewise, you should open a practice account with any broker you are planning to trade with.
Almost all brokers now offer practice accounts, which let you get a feel for the broker before committing any money.
It allows you to practice virtual money before you decide to start trading your real capital.
It also allows you to test the broker’s trading platform. Plus500 offers an unlimited demo account for its customers.
Additional parameters for choosing the best Forex Broker
Some brokerages offer rock-bottom account minimums. You don’t need to deposit high capital anymore, to trade Forex.
Online brokers will try to snag your business by offering promotions. Cash and prizes are all part of the game.
The educational services your broker provides will aid in your mastery of the Forex market. Most brokers offer a variety of educational tools to assist in a trader’s assessment of the Forex market. Benstride has done the market research for you – check out the Best Forex brokers here.
Choosing the best Forex broker could make the difference between making money and losing money. Make sure you choose the broker that will provide you the best possible environment to succeed in. Above all, a broker that you can trust.
Vincent Nyagaka is a Professional Trader, Analyst & Author. He has been actively engaged in market analysis for the past 7 years. He has a monthly readership of 100,000+ traders and has taught over 1,000 students since 2014. Vincent is also an experienced instructor and public speaker. Check out Vincent’s Professional Trading Course here.