With so many to choose from, which one is the best?
Before
a Forex trader can embark on their trading journey, one of the first
thing every trader must do is selecting a Forex trading brokers. Since
Forex is an over-the-counter market, it is not as heavily regulated as
compared to the stock market, as a result, there are literally thousands of online broker to choose from and selecting the right broker is like going shopping on boxing day.
Below is a list of 5 qualities that you should consider when selecting the best Forex trading brokers:
1) Company's year in operation and its financial regulation
Because
of the popularity of Forex in recent times, you will notice an insurge
of brokerage company offering Forex trading in the last few years
starting from 2008. Newer company does not always affect their
reliability but it is advisable for a smart trader to choose an older
company around 2003 or even pre-2000 as they have more experience with
handling Forex transaction and possibility in most cases, provide better
customer support.
Before signing up with any brokerage, it is also important to cross check rather the company is financially regulated.
This ensures that your deposited money is protected in an event of a
crisis so the loss of your capital will be compensated accordingly.
2) Platform Reliability and User Interface
Every
brokerage offers a unique trading platform with various features that
are suited to traders' need. It is important to get familiar with the
particular brokerage trading platform as you will be spending most of
your trading time executing your trade there. The best thing to do is
before depositing real money, most brokerage offer free practice account so you can familiarize yourself with the platform and its many features.
3) Spread
Spread
is the difference between the ask/bid price. This is essentially how
the brokerage makes their money off their client. Well, everyone got to
find their own way to make their own money right? Ideally, you want to
shop for brokers that offer low spread. Typical spread range for
standard account trading the most common currency: EUR/USD is 2-3 pips.
Depending on the size of the account, it is even possible to go as low
as 0.9-1.5 pips on EUR/USD if you negotiate with your brokerage. This is
important because every trade you make, spread cuts directly into your profit.
This is especially the case for scalper or daytraders who do high
volume trades per day. Therefore, it is important to keep spread lows so
you can keep your profit at the end of the day.
4) Leverage
Most
brokerage offers 50-200 times leverage. Some even offers 400 times
leverage. Leverage is of course a double-edged sword because it could
mean double the rate of return on investment or double the rate of loss.
It is advisable for beginning trader to start with 50x first before
moving into the standard 100x leverage and move on higher when you have
the capital to do so. Again, proper money management is key to long-term
FX success.
5) Deposit currencies of choice
In
the past, most Forex trading is conducted in US dollar as most traded
currencies on the board are pegged to the US dollar. However with the
instability of the US dollar, some brokerage are beginning to offer
accounts in Euro or Yen. It might be a smart move to use these
alternative currencies as they are becoming more reliable and rises in
value in comparison with the US dollar.
