3 Most Important Criteria for Choosing a Forex Broker
The Forex market is the most prominent global financial market with an average daily trade volume of over four trillion dollars. There is no one single central platform for the Forex market, to trade Forex, you need to choose a broker to assist you to execute your trade.
There are many Forex brokers in the FX market which makes choosing the right broker an overwhelming task especially if you just starting out in the market. To help you sift out the proven Forex brokers from the “chaff,” we have provided below three most important factors for choosing a Forex broker.
What are the three most important criteria for choosing a Forex broker?
1. Regulation and Compliance
Sign up with a regulated broker. The regulatory body needs to be a reputable and popular organization. When a broker has licensed from a legitimate regulatory agency, it shows that the company would fulfill the highest standard and always meet the stipulated fund requirement. It also shows that they manage their deposit as specified by the licensing authority.
The most popular regulatory body in the UK is the Financial Conduct Authority (‘FCA’) while in the US a reputable Forex broker must be a member of the following financial bodies: the National Futures Association (NFA) and the U. S. Commodity Futures Trading Commission (CFTC). To operate legally, a broker must register with CFTC as a Futures Commission Merchant and Retail FX broker.
All brokers that are regulated mentions this on their website under the about us section. Other countries apart from the UK and US have their own regulatory body, so ensure you choose a regulated Forex broker to ensure the safety of your investment.
2. Trading account features
Every Forex broker’s accounts come with different trading features including the following:
• Leverage and Margin
Forex traders can access different leverage amounts. The advantage offered differs from broker to broker. A few offer 50:1, 200:1 or 400:1 leverage amounts. Leverages are extended loans given to margin account holders by their brokers. Leverages can be both profitable and risky for your deposit. You must be cautious when trading with leverage.
• Commissions and Spreads
The profits of Forex brokers either come from their commissions or spreads.
• Initial Deposit amount
What is the brokers initial deposit amount? Some brokers have a very minimal initial deposit amount like $50. Try brokers that give you investment options by opening either a mini or micro account.
• Ease of Deposits and Withdrawals
What are the brokers account withdrawal and funding policies? Does the Forex broker allow variable means of funding and withdrawing funds like through a credit card, ACH payment, PayPal, wire transfer, bank check or business or personal check? How easy can you withdraw your fund and what is the broker's charge for withdrawal?
3. Trading Platform and Customer Service
The brokers trading platform must make it easy for a trader to navigate through the site and trade. The trading platform software must be user-friendly, come with an intuitive and appealing interface, contain many technical, analytical and fundamental tools needed to execute trade successfully with ease. The platform must also have the following features:
• Clear ‘buy' and ‘sell' buttons
• Customization options
• Order entry types,
• Automated trading options
• Strategy builders
• Trading alerts
• Free demo accounts
• 24 hours availability of customer support
Conclusion: Safety and Reliability of the Forex broker
A reputable and safe Forex broker must be reliable. Security and safety of traders must be their paramount interest. A safe and secure broker must be active on the market, obtain a license from a reputable regulatory agency, make it easy for traders to withdraw fund from their account, offer comparatively low spread and only make money by attracting more customers than ripping them off with charges.