The first step you need to do to trade on the forex market is opening a trading account with a forex broker. Some brokers offer better trading position than others, and you need to know what to look for when choosing a forex broker.
What is a Forex Broker?
Forex brokers have significantly lower transaction costs. They usually don’t charge any commissions and don’t require trading fixed lot sizes.
Example: The EUR/USD pair has a bid price of 1.1755, and an ask price of 1.1757. This 2-pip difference in price represents the income of forex brokers. Furthermore, the flexible lot sizes in forex allow you to open positions of any size you want. That being said that, there are still a few notable differences among brokers that need to be addressed before beginning the first trading account.
Click on below video: What you need to know before Trading FX
5 Important Things That Influence Your Decision When Choosing a Forex Broker
Now you know what a broker is and let’s look at the 6 most important things that should change your decision when choosing a forex broker.
We will go into greater detail about each one below:
- Account Security
- Demo Accounts
- Leverage Range
- Charting Platform Integration
- Customer Service
1. Account Security
The important point when choosing a forex broker is its security. At the end of the day, you want the money to be safely deposited with a broker that is regulated by a related financial authority. Some of the most often regulators in forex market include CySEC (Cyprus), FCA and PRA (UK), NFA and CFTC (USA) and ASIC (Australia).
Make sure that you find the brokers regulating body on its website before moving on with the checklist. A regulated broker also processes your withdrawal and deposit requests fast and without any problems.
2. Leverage Range
Currency pairs normally move less than 1% daily. To be able to profit from those small price movements, a large amount of leverage is available in forex. Leverage is loan provided by the forex broker, which can be used to open significantly larger trades than your trading account would allow. The broker automatically allocates a portion of your account as collateral for the loan, called the “margin”.
That being said, forex brokers offer a range of leverages, like 50:1, 100:1 or 800:1. However, you need to be cautious when trading on leverage, as it can magnify not only the profits but also losses. Financial regulators normally put a cap on the amount of leverage a regulated broker can offer. So, US brokers offer the maximum of 50:1, while leverage of other regulated brokers is usually up to 100:1 or 200:1.
Click on below video: Trading Forex with Leverage
3. Demo Accounts
Before moving to an original account and start trading with the money, you should first get a feeling for the market with the demo account. Forex trading involves substantial risk, and you should be familiar with your trading platform and basic trading concepts, such as position sizes and the impact of leverage, before going to real. Today, most of the forex brokers offer demo accounts.
Click on Below Video: How to Create a Forex Demo Account?
4. Charting Platform Integration
The trading platform is your window to the forex market. It should be user-friendly, visually engaging and offer all the features that you needed. Today, most forex brokers offer the desktop trading platforms such as MetaTrader4, SmartTrader in addition to some mobile apps or web-based platforms.
5. Customer Service
A great forex broker should also have great customer service. Unexpected positions happen along the way, and you need to be sure that the broker will resolve all your problems promptly.
It’s important that you can contact the broker in a number of ways, such as via telephone, chat, or e-mail. You can give your broker a quick call before you open an account to check what the waiting lines are and how reliable and accurate the customer service is in answering your questions.