Choosing a Broker: Your First Step to Forex Success

As the online Forex trading market becomes more and more saturated and the choice of brokers becomes wider, the decision of which broker to trade with becomes more and more important to the trader. Although most brokers provide the same basic trading platform, there can be a big difference in what they offer their clients, both in terms of trading conditions and customer support. Simply by visiting a company’s home page, it can be difficult to separate the second-rate companies from the professional ones, therefore this article will examine the main parameters that need to be considered before creating an account and depositing.

Account type

The decision of what type of account to open will probably depend on the amount of capital you have to invest. Most brokers offer two main account types: a “Mini” ($100-$200 minimum deposit) and a “Standard” account ($1,000-$2,000 minimum deposit). Mini accounts are best suited for new or amateur traders looking to gain experience and confidence in the market with a smaller investment and offer the higher leverage you will need to make money with such a small amount of start-up capital. “Standard” account holders can expect to enjoy a wider variety of leverage options, but will have to invest a larger sum of money for the privilege. Although not as commonly advertised, many brokers provide a premium service for large investors (perhaps $100,000 – $250,000+), including additional VIP services such as a dedicated fund manager and custom conditions.

Common to almost all online brokers is the offer of a demo account, which allows users to familiarize themselves with the software and gain trading experience without the risk of market exposure. No doubt these simulations are beneficial to potential customers wishing to test the waters, but warning emptor: they are not always representative of actual market conditions, of the actual platform, despite claims of full functionality. Do not be afraid to ask a broker on this matter – an honest and trustworthy broker will admit the flaws of a demo account.

Software Considerations

The forex market can move at a fast pace and will often require you to make quick decisions and executions regardless of where you are. Depending on your level and frequency of trading, as well as your travel habits, it may be wise to choose a broker that offers a web-based Java trading platform, which requires no download and allows you to trade from anywhere in the world.

Payment options

Look for brokers that allow you to pay by credit card, as this is the easiest option and does not involve the need to transfer funds from an online electronic account. Other payment options typically offered include bank transfer, which is just as secure as credit card, but please allow several days for it to clear and access your funds.

Support

Perhaps one of the most crucial considerations, and one that can potentially have a significant effect on your business success, is the issue of customer support. Whether you are a first-time Forex fan or an FX veteran, having the support and advice of a trusted and dedicated customer service team is undoubtedly invaluable, so it would be wise to do your homework on this one. The only way to measure the quality of a support team is to contact them and see how they deal with your queries: are they fast, do they provide reliable technical and market advice? Do you get the feeling that they know the industry well enough to advise others, or are they just good salespeople? This may not be easy to figure out, but as the only point of contact between you and the broker, it’s important to do so. As with any business, pre-sales service can be more satisfying than post-sales, so again, try to judge if you’re getting help or just being promoted.

Platform, tools and analysis

In today’s online marketplace, it’s rare to find a company that doesn’t offer real-time tools like charts and price updates, but unsurprisingly, the quality and availability of such apps will vary from broker to broker. Ideally, you would have access to a wide range of tools, allowing you to assess the market 24 hours a day, make your trading decisions accordingly, and in addition, your broker should also provide you with daily market reports, prepared in-house by professional analysts. . . These reports should cover the basics: relevant economic news for major currencies, technical movements, and general commentary. The most reputable and well-known analysts have their reports published on several of the largest online forex portals and forums, which is an indication that their data is considered accurate and reliable, which in turn gives you some more information on the reliability of the brokerage. itself.

As mentioned above, many trading platforms offer the same basic features, but not all brokers cover all areas of the forex market, so before you commit, make sure your chosen platform allows you to trade the currency pairs. what do you need.

spreadables

Spreads are an important factor to consider before investing and will certainly require some shopping around to find the best deal to suit your trading habits. The spread is the difference between the price at which the currency can be bought and the price at which it can be sold at any given time. Forex brokers do not charge “commissions” so this difference is how they make their money; Therefore, the lower the margin, the lower the commission, and unlike stocks, currencies are not traded through a central exchange, so the margin may differ from broker to broker. Spreads differ by account type, with mini accounts offering spreads 1.5-2x higher than those offered for standard accounts, which in turn are higher than those offered to big-box traders. volume with VIP status.

“Fixed” spreads remain the same day or night, and despite market conditions, and while they are usually a bit wider than narrower variable spreads, they can be safer in the long run by providing a level of slightly higher predictability and a slightly lower margin. level of risk “Floating” spreads change according to market conditions (which may initially be attractive during a calm period, but once the market becomes active, they are likely to widen considerably, meaning that the market will have to move significantly in your favor before you make a profit). is rotated).

leverage

Unless you intend to invest a six figure sum of capital, the use of leverage will be essential to making decent profits in forex. Generally speaking, the sum of money made during a successful trade amounts to only fractions of a single cent per unit, so if you are buying lots worth a few thousand dollars or less, your profits will be minimal. This is where leverage comes in: in effect, by temporarily “borrowing” funds from your broker, you will be able to make larger trades which, if all goes to plan, will lead to larger profits. Obviously, this practice involves inherent risk: if the market worsens, you risk losing a substantial sum of money, depending on the amount of leverage taken. For this reason, it is advisable to read a little more about leverage and margins before using leverage, so that you are fully informed before exposing yourself to the open market. Under normal market conditions, some common currency pairs are generally less volatile and may warrant a higher level of risk taking, while more exotic currencies may not be predictable enough and traders are advised to use less leverage when trading. engage with those peers. Mini accounts provide the highest levels of leverage, with some brokers offering up to x400.

Education

While practicing on a demo account can help you improve a bit and trading for real money can teach you some hard-earned lessons, the best way to improve your trading skills and gain a solid foundation of knowledge is to educate yourself. In this regard, more and more online brokers are offering trading courses or tutorials, ranging from free five-minute “intros to forex” to lesson plans that cover the smallest details and cost thousands of dollars. Well-established educational centers such as Online Trading Academy (OTA) with years of experience in technical training are your best bet as they provide solid instruction that will not only teach you the basics of the market but also the technical aspect of trading (advanced technical analysis, charting, chart reading, Fibonacci calculations, etc.). Some brokerages produce their own courses in conjunction with such trading centers, such as the course offered by Forexyard.com. Without educating yourself, the vast majority of built-in market tools offered by trading platforms will go to waste on the amateur forex trader.

In short, there are numerous factors to consider before choosing the right online forex broker, all of which should be researched to ensure that your trading account and broker allow you to get the most out of your investment. You should be aware that some brokers do not have your best interests at heart, but don’t despair as there are many reputable and trustworthy companies eager and capable of providing professional service. As part of your research, be sure to visit the many online trading forums, where you can discuss any of the topics raised in this article with other traders, many of whom will have already gone through the process of choosing a broker and will be able to advise you. from their own experiences.

Article written by FOREXBACK YARD.