Forex brokers come in diverse shapes and sizes; while some offer platforms that target retail traders, others offer advanced trading accounts. With numerous options available, it can be challenging to find a reliable one. So, if you are looking for a forex broker best suited to your needs, here are the top things you must consider.
Every forex broker has its own fee structure; therefore, the trading costs can vary. While some brokers make money through spreads, others charge a commission for every trade. They also offer other costs such as overnight and inactivity fees. Ideally, a trader should look for a broker who has low spreads or low (or no) commissions. However, you need to find a balance between the two. Various brokers offer premium accounts to access cheaper trading when you deposit additional money (in excess of £1,000). CFD brokers charge overnight fees to keep their trades open for several days at once. Similarly, inactivity fees are charged if you don’t use your account for a particular period, usually 12 months.
You must choose a regulated broker to keep your money safe. Every trustworthy broker is regulated by a financial authority. It is easy to check the regulatory status of a broker by checking its license number, which is displayed in the website’s footer. Also, you can cross-reference the license number of the regulator’s website.
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3. Supported Currency Pair
Firstly, decide the currency pairs you wish to trade and check if the chosen broker offers the same currency pairs. Most reputed forex brokers always provide all the major currency pairs such as EUR/USD, USD/CAD, GBP/USD and more. At the same time, others offer minor currency pairs as well. This point is particularly important if you wish to trade in exotic currency pairs, as very few forex brokers offer them.
4. Execution Speed
Slippage can ruin a trader’s life. It is a situation where the price at which you placed the trade changes just before the order gets to the exchange. This means you get a worse price than what you expected and can particularly damage day traders because their profit margin is small on each trade. Therefore, look for a broker to execute the trade as soon as possible.
5. Risk Management
The best forex brokers know they are responsible for taking care of the traders using their trading platform. They offer “Negative Balance Protection” to ensure their account never goes negative in the figure. This protection helps traders to lose their funds on specific trades. Some brokers even offer automated advice to help traders know where they are going wrong and losing money.
6. Software Integrations
Forex trades use some trading platforms, such as MetaTrader, to trade. This software is mainly responsible for routing your trades. Therefore, choose a forex broker who offers flexible trading platforms with high software integration.
Leverage is considered an essential part of forex trading. Since the fluctuations in the currency prices are small, you need to resort to leverage to place large trades to make sufficient profits. While many forex brokers offer high leverage, their maximum leverage can vary. Additionally, professional accounts get more leverage as compared to retail accounts. Hence, the choice of the forex broker also depends upon the amount of leverage you want to use. However, beginners should be very careful when using leverage as they can lose their money if leverage is not applied correctly.
8. Economic Calendar
Important economic events, inflation reports and monthly employment data are key drivers for fluctuations in currency prices. This is why a broker who can offer you access to an economic calendar would be great, as you would be able to check what data has been forecasted by economists and how it can make the price move. The best economic calendar is the one that includes events all across the world. You need to consider the economic events of both sides of the currency pair, so for trading the USD/GBP pair, you need to look for data that reveals the economic conditions of both countries.
The traders can also utilize customer reviews to check the broker’s trustworthiness. The Internet is an excellent source to check what customers think of any particular forex broker. Social media is yet another way to know more about the broker’s trading platform. Additionally, you need to do some additional research to avoid FX broker scams. You can find many fraudulent people who can trick you and run away with your money. Therefore, look for genuine customer reviews to steer clear away from fake brokers and stick to safe and regulated ones.
10. Industry Awards
The forex industry awards the best-performing brokers. So, along with your research, you need to determine which brokers have won awards to narrow down your options and select a quality broker. For example, if you wish to do trading on mobile, look for the one who has won an award for best performing forex application. Additionally, there are awards for best execution speeds, best affiliate programs, and more.