How to Find Your Forex Broker?
The choice of your broker is an important element. To choice a wrong broker can prevent you to apply correctly your trading strategy, make you lose a trade, or worse, make you lose all your capital if the broker goes bankrupt.
That’s why, before watching the features of the broker, do something simple: go to the website of the broker. This seems weird but most often; this allows you to see the professionalism of the broker. If the website is clear, well presented, it’s often testimony of confidence.
The number of languages available on the website is also important. Whether the website is not available in a language you’re not comfortable with, do not continue because it means that all the support in case of problem will not be in your language.
Then, it is advisable to go on forums and read opinions of other users who have already tested the broker and its platform, in order to get an opinion on the reputation of the broker on the market. The size of the broker is also important. Check the number of customers registered with the broker. So, you could know if you can trust the broker.
At last, you can watch all features of the broker. I will try to make an inventory of all important ones:
1. Trading platform: it is very important to choose a platform on which you are comfortable. After everyone can have a different point of view but I can give you some tips.
At first, see if the platform is intuitive or not. You should easily understand how to place an order and how to use of graphics. However, ease of use should not be the only criteria. On some platforms such as Metatrader 4 (the most known and used), everything is configurable. On others it is sometimes difficult to add an indicator for example. So check all these details to avoid unpleasant surprises later. Always test a platform on a demo account before registering.
2. Account currency: According to the broker, your account currency will not be inevitably the currency of your country. Some brokers propose only USD. Do you accept to see your account in a foreign currency? Here again, it is a problem that’s own you.
3. Minimum deposit: For this section, this is your bank account which will answer for you. If you trade with important funds, all is open but if you don’t have much at your disposal, so you will have to find a broker that’s allow you to open an account with the few you have. Nevertheless be careful, even if some brokers offer you the possibility to open an account from 200 USD for example, you should look also at the minimum transaction amount through the minimum lot size manageable. If the minimum transaction size is 0.1 lot (10,000 units) and you want to open an account with 100 dollars, then find another broker. The minimum transaction size should not make you use a high leverage.
4. Bonus: Almost all of bonuses offered by brokers are free margin. This is usually a percentage of your deposit (eg 30%). This does not mean that if you deposit 1000 USD, you have earned 300 USD. The additional 300 USD will be added to the balance of your account but you cannot be wire to your bank account immediately. It just helps you to deal with larger amounts of positions or simply to continue to trade. You can however remove the amount of the bonus if you trade a certain amount of cumulative position with your broker. For example, each lot, the broker will allow you to freely dispose of 10 USD of your bonus.
5. Max leverage: Many people are attracted to the Forex because of the substantial leverage available and adjustable at will. The leverage at your disposal is indeed very important and varies according to the broker. A leverage of 1:100 means that you can trade to 100 times the amount invested. So 100 USD gives you access to lots of 10 000 USD. But beware! Of course you can earn a lot of money but you can also lose a lot. Never use a leverage too high compared to the balance of your account or few seconds could be enough to make you lose all your capital…
6. Fees: There are two types of fees, one on withdrawals and the other on transactions. Most brokers do not charge for withdrawals. Some however make you pay transaction fees. This is the case of brokers with variable spreads. Their spreads are often smaller, but there may have fixed commissions on trading volume. If we add all these fees, the real spread is often greater than the one displayed on their website. So you should check with the broker all commissions on transactions.
7. The number of treatable pairs: If you want to trade only the major pairs, you will have no problem, all brokers offer them. In contrast, for less known pairs, you should check with the broker but the spread is obviously more important than on the major. On the other hand, some brokers offer you the possibility to trade commodities, CFD’s and indexes.
8. Spreads: The brokers will offer two types of spreads, fixed and variable. Fixed spreads as their name suggests will not move and are undertaken by the broker regardless of market conditions. Indeed, in a news announcement, the market is extremely volatile and the spread can be huge. With the fixed spread, this will not happen. The compensation is that most often fixed spreads are higher than the variable spreads. Indeed, those operating in variable spread offer very small spreads in normal market conditions but may become very large in some cases. It’s up to you to make your choice.
9. Technical Support: All do not, but online support can be very useful. With some brokers, this help will be available on their website through a chat and others will have a phone call center. Then you could ask any questions you want. Brokers also offer you the opportunity to make your orders by phone.
10. Trailing stop: Trailing stop can be very useful. They allow you to not be all the time in front of your computer. After, some like and others not. If you want more details on the trailing stop,Trailing Stop.
11. Method of payment: it is a point that should not be addressed because the initial payment must be self sufficient … All brokers offer wire. But again, being able to deposit funds via credit card or other is faster and easier.
12 – Bank Guarantees: Ask your broker the guarantees it offers to secure your capital in case of bankruptcy. With some brokers, you will not get anything while with others (better controlled), your capital will be guaranteed up to 100,000 USD.
13 – Execution time / Slippage / requotes: Some brokers offer spreads very attractive but it should not be your only criteria. Indeed, speed of execution can be very slow and you will see many requotes at the time you place your order. Thus, you will almost never be executed at the price requested. This is easily tested by opening a demo account at a broker that will allow you to judge all these criteria.