The 5 Things To Consider Before Choosing A Forex Broker

by Avramis Despotis     Jan 14, 2019

4 mins read

If you’re looking to get started in Forex trading, then preparation is extremely important. For you to succeed in forex one of the first things you need is a good broker - and like many other things in life, finding the right one for you is worth the time investment. You want to treat getting your first broker the same way you would buying your first car. Shopping around, comparing prices and checking out offers is essential and can get you a better deal than just going for the first thing that sounds like a good deal. This is trading 101 as a good broker is as important as a good trade. Below we list the most important criteria to consider when getting a broker.

Regulations.

A good broker is registered in the right places with the right authorities. Under no circumstances should one ever trade through a broker that isn’t properly accredited - it’s the first sign of a broker being not 100% honest. Also take note of the location a broker is regulated at. Common tactics of shady brokers is claim they’re “registered in an EU country” when they’re registered in Cyprus - technically an EU country, but significantly more lax with certain forex regulations than, say, the UK. Another common form of this is claiming to be “registered in North America” when in reality the broker is licensed for Mexico, which is again technically true but takes advantage of your expectation of them being from New York or something. Researching these things will be important in your forex trading 101 notes.

Charting.

Every decent broker will offer some sort of platform for you be trading on. Charts are extremely important as they give you the baseline data you need to make trading decision. Most brokers will give you access to an Electronic Communications Network (ECN for short) and then sell some add-ons to make your life easier. There are also independent platforms available nowadays, but a broker that has your best interest at heart will equip you with tools to succeed.

Currency pairs.

Depending on the currency you want to trade you need to check with your potential broker on what currency pairs they offer. If you’re only planning to trade on the big 7 currencies, which are in no particular order: US Dollars (USD), Euro (EUR), British Pounds (GBP), Australian Dollars (AUD), Japanese Yen (JPY), New Zealand Dollars (NZD), Canadian Dollars (CAD), then most brokers will be fine. However, there are hundreds of potential currency pairs out there, so check which ones you intend to trade and see which ones your potential brokers offer in the first place.

Leverage.

Leverage is very important as it can really boost your profits or really magnify your losses. The concept is simple - for every dollar of capital you personally put in your account, your broker will match by a certain factor. For instance at a 1:250 ratio, you’ll only spend $1 of your own money, but can trade with up to $250 instead. This is important since often the profitable fluctuations between currencies are in the cents, so using leverage can really improve your success. On the flipside, if you’re generating losses while using your leverage, those are debts you’ll incur and have to pay back.

Analysis.

Any good broker will have financial analysis available that will either send you out a digest every morning or evening to help you prepare for the next day or some similar service. Some brokers will have analysts that you can call on for free to get their professional insight on the markets and current events. This is extremely useful to new traders and should be used as much as possible.





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