Instead, Forex traders must conduct their trading activities through an intermediary, the Forex broker. When it comes to choosing a broker, traders have literally thousands of Forex brokers to choose from on the internet.
But the real question is how can you be certain that the broker you have chosen is the right fit for your trading needs. To help you in your broker selection process, we have prepared a guide with a list of key factors that you have to look at when choosing a broker. The first thing that you should look at when selecting a broker is to see if the broker is regulated by a competent regulatory agency. By dealing with a regulated broker, you can have the assurance that the broker has met the operating standards imposed by the regulatory body.
Additionally regulation offers fund protection should the firm become insolvent and ensures the broker is upholding rigorous standards as a financial service provider. Countries that have financial regulatory agencies that are backed with strict regulatory enforcement include:. As the trading platform is your gateway to the market, you want to ensure that the trading platform that you are using can be relied upon. Most brokers will offer traders a selection of trading platforms to choose from.
Most of the time, the trading platforms are provided by third party trading solutions providers such as MetaQuotes Software. There are also some brokers who have taken to developing their own proprietary trading platforms in an attempt to differentiate themselves from other brokers in the industry.
Nevertheless a good broker should be able to provide a good selection of platforms. This is because some traders prefer to trade from the desktop computer and some traders prefer to trade from their smartphones. It should be noted that the most common trading platform that you will find among the different brokers in the industry is the MetaTrader 4 platform. So this means there is a very strong possibility that this is one of the platforms that you will be using.
While all these may seem trivial initially, they will later play a crucial part in ensuring that you will get to enjoy a seamless and productive trading experience. But when it comes to platform selection, it is really a matter of personal choice. Most of these platforms will have the same basic features. The best way for you to find out which platform is right for you is to try them out with the demo account provided by the broker. For those brokers that do not provide a demo account, they may not be worth considering.
This market unlike other traditional financial markets mostly operates on spreads rather than commissions. This is the reason why most brokers advertise their services as being commission free. Simply, they earn by charging traders a spread. The spread is the difference between the buying price and selling price.
Generally for traders looking for certainty with their trading costs, fixed spreads will be the preferred choice. Traders who are looking to pay a smaller spread would prefer floating spreads. Ultimately as to which is better will depend on your specific trading needs. The kind of spreads that you will receive depend to a large extent on the kind of business model the broker is operating on. All these terms are in fact used to describe the business model which the broker is operating by.
So what do they all mean? Forex dealer or Market Maker processes their clients trading instructions through a dealing desk within their company. They are both essentially the conduit between you the trader and the market maker or dealer. Market makers or dealers will transmit their pricing to the ECN or third party liquidity provider together with the volume which the quote is valid for.
The business model of the broker is important as this will affect the kind of spreads that you will receive and whether the spread will be fixed or variable.
For professional traders, their trading needs differ significantly from those of a beginner trader. Generally, professional traders prefer brokers which can provide them with:. Generally for a day trader, most brokers will be able to meet their trading needs.
However given the shorter time period with day traders are trading with, it is best that the broker is able to provide a diverse range of instruments for the day trader to scout for trading opportunities. These can include a signal service, tools like an economic calendar, updating market news and also earnings reports. As you will probably be placing more short term trades make sure that you are aware of the spreads before you trade.
Scalpers are traders who hold their market positions for an extremely short period. While they only hold a market position a short period of time, the frequency of their trades is higher than the average trader. Their objective is only to make a small profit on all the trades that they make spread across a large number of trades.
Note that not all brokers allow scalping. As such if you intend to trade as a scalper , you should always check with the broker that you intend to sign up if they allow scalping. The majority of the forex brokers in the industry offer traders a selection of trading accounts to cater for different categories of traders. With the Micro and Mini account, only a low minimum initial investment is required to let you start trading. With the standard account, although the minimum investment may vary from broker to broker, generally you will need a higher amount of trading capital.
Given the varying minimum investment for each type of trading account, you should select the trading account that is commensurate with your investment capital. Most beginner traders tend to forget to factor in customer service when making their choice of the broker to sign up with. They may not realize the importance customer service plays in their overall trading experience.
With customer service, it is not whether you will ever need their assistance but rather a question of when you will need their assistance. Because regardless of how experienced or knowledgeable a trader might be, there will always come a time when assistance from customer service is required. When that time comes, you want to be able to get in touch with the support team without any difficulties. So it is important to check if the broker that you intend to sign up with is able to provide you with reliable customer support.
Check to see if there are multiple ways of contacting customer support. Most brokers will provide their clients with several ways such as email, live chat and telephone for their clients to get in touch with customer support.
In an industry as competitive as the online forex trading industry, some brokers will try to distinguish themselves from other brokers, by offering additional value added services such as free market analysis, real time news feeds and trading signals. Most of these value added services are provided free of charge but there are some brokers which may require you to deposit a minimum amount before you can have access to these services. If you have any general questions regarding brokers we can usually advise and recommend, however for more specific information you can read our broker reviews for deep insight.
Our video reviews cover many aspects of the trading cycle. We are here to help with that! Check out our list above and choose the most suitable broker for you.
Yes, you should try to pick a regulated broker to work with. This ensures recourse in the event of a dispute or should your broker face insolvency. Remember by using a regulated broker you will also have access to an investor compensation fund, which insure your deposit up to a certain amount. You should look at the range of platforms on offer and even ideally test-drive the platform you may wish to use. Take a look at the additional resources being offered by that broker eg.
Signal service, educational tools, copy trading. Finally remember to find out about spreads, and account types before you place a deposit. As noted above, there are many factors that you have to consider when selecting your broker. Nevertheless with the help of this guide that we have provided, you should be able to see which broker is better suited to your needs. To further facilitate your search, we have also conducted in-depth reviews and vetted each of the brokers in our recommended list to ensure they meet up the right standards.
Once you have found the right broker to work with, you can focus more on your trading activities and trade more confidently thereby increasing your chances of success trading the market. It is for this reason that FXEmpire is perfectly placed to help our readers choose reliable Forex brokers to work with. With that in mind, we have compiled this resource, which looks at all the key factors a trader should consider before selecting a broker to work with, as well as a list of the best Forex brokers to save you the legwork and hassle that comes with finding a broker.
We hope you find it useful. Best Forex Broker Your capital is at risk. All trading involves risk. Your capital might be at risk.
Countries that have financial regulatory agencies that are backed with strict regulatory enforcement include: Additional Features Look at the features which the trading platforms have to offer. Do they come with: Comprehensive charting package Wide range of technical indicators One click trading on the trading platform Risk management tools such as stop loss order and trailing stops.
So how do brokers make money? As a Forex trader, you will come across 3 kinds of trading cost structure charged by a broker: Fixed spread — where the spread is not changing and you know the spread amount before you trade. Floating spread — this spread is variable and always moving depending on the market volatility.
Commission fee — this is calculated as a percentage of the brokers spread. You should be aware of the amount payable before you trade. Dealing Desk Forex dealer or Market Maker processes their clients trading instructions through a dealing desk within their company. Why is this important? Forex Broker for Beginners For beginner traders, look for brokers with the following qualities: Comprehensive trading education resources — many brokers supply a suite of education materials to help push traders into mastering their skills.
These usually include webinars, videos, courses, guides and articles. Unlimited access to the demo account for practice trades — most if not all Forex brokers supply demo-trading accounts to their clients. User friendly trading platform — there are a whole host of trading platforms on the market, some more complicated than others.More...