How to choose a reliable Forex broker
The foreign exchange market boasts more than $5 trillion traded every day. This impressive fact makes it the largest financial market in the world. Well, since there’s no central marketplace in this particular case, market participants are expected to pick up a Forex broker to assist them in conducting their transactions on a regular basis. Anyone interested in working in the foreign exchange market, including you, should know for sure how to choose a good Forex broker. If you keep reading this article, you will get a bunch of useful tips on how to choose a Forex broker.
A Forex broker: what is it?
Forex brokers can be defined as companies, providing currency traders with direct access to the foreign exchange market via a trading platform. With a Forex broker, you can sell and purchase various foreign currencies with a couple of clicks on your laptop. What’s more, thanks to a Forex broker you have a fantastic opportunity to conduct transactions round the clock, profitably exchanging currencies of all countries. Conventional stock traders of the 20th century could only dream of such a mind-blowing opportunity. If you’re long dreaming of complete financial independence, you can take advantage of Fxmcapital – one of the most reputable Forex brokers in the market.
With a constantly growing number of Forex brokers in the market, it’s getting harder to pick up the worthies one. Eventually, for an average person deeply interested in currency trading, choosing a Forex broker suggests digging through a huge number of Internet ads and magazines. In this review, you’ll get crucial points you need to go through to pick up the right Forex broker.
If you’re starting out as a currency trader or you’re just considering the very idea of Forex trading, working with a reputable broker can be very helpful. Of course, like in any other business, it also involves certain risks. It can be a puzzling thing to figure out where to spot a Forex broker that provides high-quality trading services, and also a bit of a challenge to ensure the broker you’ve just come across is smart and reputable enough to meet your requirements and needs. With rich experience in the industry, Fxmcapital is capable of adapting to even the most sophisticated needs of its clients.
Why do you need a Forex broker?
Just ask yourself what type of company you’d like to reach out to in case of having a trade dispute. The purpose of this question has two aspects. First, you need to know whether it’s a reputable firm, to which you could entrust your money. Secondly, you need to learn whether the company’s funds are properly regulated.
Both regulation and financial transparency are of supreme importance when it comes to how convenient you should feel with your Forex broker. As volatility has drastically picked up in the foreign exchange market, a great number of undercapitalized Forex brokers shut down shop with a minor warning. Do you want to deal with any of such traders? You certainly don’t want to be left in a significant mess. If you properly understand the financial positioning of your Forex broker, it won’t be a big problem to foresee whether this particular company will be able to withstand the fiercest upcoming financial storms or not.
The first point of your search should be conducting deep research with the purpose of figuring out whether this particular firm has a perfect reputation in the Forex market and whether it’s capable of meeting your needs. As a rule, reputable brokers allow their prospective customers to test their services by means of a demo account, so that they could get a general understanding of what the whole system is really like. It would be a good thing for you to test out as many trading platforms as possible before you decide on a certain company. The very purpose of the remainder of this review is to teach you how to recognize a good broker, which can show you the right path to absolute financial independence.
The regulatory compliance of your potential broker
The very first thing you require checking when searching for reputable Forex brokers is their regulatory compliance. For example, in the United States, a trustworthy broker working in the Forex market will 100% have a membership in the National Futures Association. Secondly, such a company will boast an official registration with the US Commodity Futures Trading Commission – it gives grounds to simultaneously act as a retail Forex broker and a futures commission merchant.
The NFA appears to be a solely self-regulatory and industry-wide institution for the futures industry in America. Its primary functions are to work out rules, software tools as well as services to protect the market and its players. Furthermore, the organization is obliged to make sure that various market participants meet strict regulatory responsibilities as well as obligations. Besides this, the CFTC happens to be a completely independent government institution whose function is to regulate the commodity options and futures markets in America. The major mission of this watchdog is to protect investors and anybody else involved in transactions from any kind of manipulation, scam, and abusive practices having to do with the sale of commodities as well as options, and futures.
If you search for good brokers, then you should realize that a professional looking website guarantees nothing. Scams can have enough money to order a catchy website to lure light-minded folks into their traps. Even if you find a company’s website user-friendly and highly informative, it doesn’t automatically mean that it’s under CFTC regulation or has the NFA membership. You can’t get and prove such crucial information by giving a cursory glance.
If the company considered by you appears to be the NFA member and subject to strict CFTC regulations, the broker will certainly state it. If the firm turns out to be the NFA member, it should be displayed on its official website. As a rule, such information can be found in the section “About us.” However, it can also be discovered on any other web page. As told above, every country outside the United States of America has its own financial watchdog. Owing to potential worries as for the safety of particular deposits as well as the integrity of the Forex broker, you should open a trading account only with a company, which is strictly regulated.
Crucial trading account details
Every reputable Forex broker boasts a number of account offerings, including the following:
- Margin and leverage: Those working in the foreign exchange market have access to a variety of leverage amounts based on the company. For example, it might be 200:1 or 50:1. Leverage appears to be a loan extended to a margin account holder by his or her Forex broker. Let’s assume, you have made up your mind to opt for 50:1 leverage. In this particular case, with an account size of about $1,000, you will be able to hold a trading position valued at up to $50,000. As you see, leverage works in your favor when having winning trading positions because the potential for revenue is considerably enhanced. On the contrary, leverage can be an extremely dangerous thing especially for those traders who don’t care about timely placing stop-loss orders. If you’re trading against the market, leverage can easily swallow up your trading deposit. Therefore, it’s up to you to utilize leverage with great caution if you really want not only to preserve but also drastically enrich your capital.
- Commissions and spread: Any Forex broker earns via established spreads and commissions. Your broker can charge a stated percentage for trades. Alternatively, the broker can obtain the difference between the bid and ask prices of the currency pair. However, many Forex brokers claim they aren’t used to charging commissions. Instead, they can earn from wider spreads. For example, the spread could be a fixed one for three pips. It can be also variable based on market volatility. Let’s assume that the currency pair EUR/USD with a quote of 1.3943 – 1.3946 features a three pip spread. It actually implies that as soon as a trader buys at 1.3946, the deal has already lost three pips of its value, since it could be entirely sold for 1.3943. We can say that the wider the spread, the more complex it can be to earn money. Eventually, common trading pairs, including EUR/USD and GBP/USD will feature tighter spreads compared to more thinly-traded currency pairs.
- A starting trading deposit: In fact, most Forex trading accounts can be financed with rather a small initial deposit. It can be even smaller than $50. As we told above, leverage can do wonders even with the smallest deposit. That’s one of the numerous reasons why this business is so appealing to newcomers. Many Forex brokers offer mini, micro, and standard trading accounts. As a rule, all of them have adjustable initial deposit requirements.
- Withdrawal and replenishment of funds: The easier it’s done, the better it is. Every broker has its own account withdrawal and depositing options and policies. As a rule, Forex brokers enable their clients to deposit funds by means of PayPal, ACH payment, wire transfer, credit cards. However, not all brokers support all of the payment options mentioned above. Check it out before deciding to work with this broker.
What needs to be outlined about proposed currency pairs?
While there’re many currencies available for trading, just a few of them deserve much attention and therefore the greatest liquidity. In the foreign exchange market, the majors are represented by USD/CHF, EUR/USD, USD/JPY, and GBP/USD. As a rule, reputable Forex brokers provide a rich selection of currencies pairs for trading.
The importance of customer service
Forex trading is an unstoppable thing. Currency trading takes place 24/7 except weekends, although some assets can be traded even on weekends. As a potential client, you’re interested in a possibility to obtain high-quality customer support at any time. It should be very easy for you to talk to a live person. It’s much better than waste your precious time trying to reach out to a frustrating and stupid auto-attendant.
While considering the most suitable company, a quick call can be a good way to learn what kind of customer service they provide. Thus, you can easily assess the representative’s ability to answer questions about such crucial technical details as leverage, regulation, spreads, etc., in an understandable and concise manner. They should also answer you how long the company has been in the industry. Of course, they shouldn’t hide the real size of their trade volumes.
Assessing their trading platform
Long gone those days when traders didn’t have any trading platforms at all. Today’s traders can’t understand how it was possible. We can’t imagine modern Forex trading without a trading platform. It’s your door to the largest financial market on the planet.
You need to make sure that a trading platform offered to you is easy to use. It doesn’t necessarily need to be visually attractive, although others can find it crucial to the trader’s overall mood. It should have a basic set of fundamental and technical analysis tools. It should ensure a possibility to conveniently enter and exit the market at any time without any freezes.
If you’re fond of simple solutions and you’re reluctant to study complex trading orders, the use of simple “sell” and “buy” buttons would be a great option. What can be better than just press the required button and enjoy the result after a while, if you have forecast the market properly, of course? Such buttons are especially helpful when it comes to trading currencies on a smartphone. Another must-have option is a so-called “emergency button” that can be rapidly utilized to close all of your trading positions. If you forget to place stop-loss orders, this button can come in handy to save you from a complete loss of your trading deposit. You’d better stick with a tried and tested solution. A typical example of it is MetaTrader 4 and MetaTrader 5 (offered by fxmcapital).