The forex market has no central marketplace. Traders must choose a broker to help them conduct their trades, but this is no easy task. There is a large and growing number of forex brokers and choosing the right one can be overwhelming.
The following are five essentials to look for when choosing a broker in today’s competitive forex marketplace.
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Regulatory compliance
A reputable forex broker will be a member of the Australian Securities and Investments Commission (ASIC) with an Australian Financial Services License (AFSL).
The regulatory authority ensures that members meet all their regulatory responsibilities.
To check if a broker is regulated by the ASIC:
- Determine the broker AFSL number typically found on the broker’s “About Us” page or at the bottom of each web page.
- Validate the license number on the ASIC website.
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Trading Platform
A good trading platform must be stable and user-friendly. Most brokers will give you a demo account to try out their trading platform. Some things to look for include:
- A variety of fundamental and/or technical charting and analysis tools.
- The ease of entering and exiting trades. Are there clear ‘buy’ and ‘sell’ buttons?
- The availability of Metatrader4 (MT4), a highly customisable platform that was specifically built for forex trading. MT4 is the standard platform for forex traders of all levels.
- The availability of elements that enhance trading. These include customisation options, automated trading options, web-based and mobile trading, trading alerts and strategy builders.
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Account details
Each brokerage has its unique offerings. You should determine the ones that fulfil your trading needs.
Commissions and spreads
Each time you enter a trade you have to pay either a spread or a commission. You need to choose a broker that offers affordable rates without sacrificing reliability.
Note: Wider spreads can make it harder to make a profit. A broker offering tighter spreads is ideal.
Leverage
Brokers have a variety of leverage amounts such as 50:1 or 500:1. Leverage is the borrowed capital extended to traders by brokers. For instance, you can hold a $30,000 position with a $1,000 account size using 30:1 leverage. You must select a broker offering leverage that suits your risk appetite.
Initial deposit
Find a broker that aligns with how much you are willing to initially deposit. Many brokers offer different account types with varying initial deposit requirements.
Currency pairs on offer
Most brokers offer a big selection of forex pairs but it’s important to select one offering the pairs you want to trade.
Execution speed
It’s mandatory to choose a broker with fast execution speeds that allow you to trade at your desired price. Low latency may be a significant contributor to your success in the market.
Ease of deposits and withdrawals
Each broker has specific funding and withdrawal policies. Choose a broker that facilitates the deposit and withdrawal of funds in a hassle-free way.
Data protection
When you open an account with a forex broker, you provide personal and financial information. You need a broker with robust security features that keep this information safe. Other additional features that enhance security include SSL encryption, 2-factor authentication, and a privacy policy outlining how your data is used.
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Educational tools
Many brokers provide educational tools but you need to opt for one with quality material that will enhance your trading. For example, FP Markets provides excellent video tutorials, e-Books, and a professional trading course.
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Customer service
The forex market operates 24-hours a day. A broker must be readily available to answer your questions and offer technical support when you need it. You need to consider the ease of reaching a broker and its prudent to go with one offering live chat together with phone and email support.
The bottom line
As a minimum, a good broker meets all the five essentials. You can eliminate the brokers that don’t cut the mustard right from the start.
The post What to look for when choosing a Forex broker appeared first on FP Markets.
