How To Choose A Forex Broker
There are several factors to be considered when choosing a forex broker. You can use the list below to help you compare and contrast various brokers. There are also many forex broker review websites that you can use to find out what other peoples’ opinions of particular forex brokers are.
1. Word Of Mouth Reputation
Of course one of the very best ways to determine if a forex broker is going to work for you is to find out what others’ experiences with the broker were like. Friends and family may have a lot of input about their experiences with online trading, and to ascertain the opinions of a larger group you may refer to online broker review sites.
By finding out what others have had to say about their experiences with particular brokers you’ll have a better idea about overall customer service and support turnaround time. After all, you want to trade with a broker that is going to be available to answer questions and a company that is going to offer the best and most timely data.
2. Safety Of Funds
Find out if client funds are insured. If so, by what means are they insured? In the foreign trading sector many brokers will tell clients that their funds are secured by this or that means of backup investments. It’s good to know about he details before having thousands of dollars entangled in a broker’s backup investments.
3. Execution
Find out what a prospective forex broker employs in the way of business models. For example, are they more of an electronic communication network or market maker? Does the broker offer automatic execution for trades? If not, how fast is order execution on average? Do they offset client trades? How much can you trade without requesting a quote? These are all good questions to ask a prospective broker.
4. Trading Platforms
It can be critical for a trading system to be able to handle high volume during a fast moving market. Though a given platform may run well on normal days, you’re not going to know for sure how it performs on fast days until you see it in action. Keep this in mind while choosing a broker and platform.
Find out how many currency pairs you can trade. Learn about the platforms various features, such as one click trading, mobile trading and the like.
5. Account Size
Find out what the minimum trade size is, as well as whether or not you can adjust the standard lot traded. Of course a broker’s minimum account opening balance may play an important role in your decision as well. Another thing you may wish to inquire about is whether or not unused equity will earn interest.
6. Spread
Is a prospective broker’s spread variable or fixed? How tight is the spread? Is the spread larger for small accounts?
7. Slippage
Find out how much slippage can be expected in both fast and normal moving markets?
8. Commissions
Does the broker charge commissions or are they built into the spread as with most market makers?
9. Margin
Find out what your broker’s margin requirement is. Is the margin requirement the same for standard and mini accounts? Does the margin requirement change for different currency groups or days of the week?
10. Rollover Policy
Find out if there are additional conditions or requirements on earning rollover interest. Is there a minimum margin requirement so that you can earn interest on overnight positions?
