When it comes to trading online, one of the most important things to do before you can invest is finding the right forex broker to invest your money with. This is in some respect even more important than choosing the currency trades that you decide to enter.
This is because there are so many brokers on the scene currently that it’s hard to find the best broker for your individual needs. For example, do you want to trade Binary Options, spot Forex or CFDs? Would you like a broker to be a market maker or an EFA broker? Where would you like the broker to be regulated?
There are so many requirements that the forex trader may know he / she has. There are, however, a number of other very important characteristics that the new Forex trader may not know initially before choosing the right broker.
In this post, we will go through some of the most important requirements that a broker must have before you decide to invest. We will also run through some other points that you may have not considered.
Article in a Glance
One of the most important things to consider when deciding on a broker is whether they are regulated or not. Regulation is what keeps a broker in tow. It is also what allows you to differentiate between scam brokers and those that are legitimate entities.
Moreover, in the case of any dispute with the broker, a regulated entity may be liable to serious fines if there was ever a case of fraud or dishonesty.
There are a number of global regulators that oversee retail Forex brokers as well as Binary Options brokers. These include CySec in Europe, the CFTC in the USA, the FCA in the UK and ASIC in Australia among others.
Due to a European Union regulation called MiFID, any firm that is regulated in a European member state is able to sell its services to clients in other member states. This is why a broker who is regulated by CySec (Cyprus Securities and Exchange Commission) is authorised to take traders in other European countries. If you are resident in the USA, then you will want to look for a broker that is regulated by the CFTC and is a member of the National Futures Association (NFA).
If you want to determine whether a broker is indeed regulated, you can ask for their license number as well as their holding company name. You can then cross check this with the regulator’s online database.
You also have to be careful to avoid scam websites that claim to be a “brand” of another regulated entity. This could fool you into thinking that they are regulated when it is nothing but a front.
Payments and Withdrawals
Knowing how easily you can have access to your funds is very important for a number of reasons. Nothing can be more frustrating than a broker that restricts a withdrawal for some hidden disclaimer that you sign.
Similarly, it is important to determine whether the broker uses segregated accounts for their clientsâ€™ funds. This means that if the broker is ever to go under, then your funds are in a safe and secure location that is overseen by an independent third party. You should also be aware of the fees that a broker may charge on some of these withdrawals as well as the time it takes for them to send you money.
If you are to make proper returns while trading, then you have to be completely comfortable with the trading platform that you are going to be using. You need to first decide what strategies you want to implement while entering trades.
Are you looking for some advanced technical analysis and scalping techniques while Forex trading? Then you will want to confirm that the broker has MT4 functionality.
You also have to decide what forex pairs or assets you would like to trade. Do you want to trade only spot forex and CFDs? Would you like to trade binary options on FX as well as assets such as Equity, Indexes and commodities? What sort of trading tools does the platform provide as standard? Does it have charting functionality? Does the broker provide any forex and binary signals as standard. Some brokers may emphasise a particular set of trading tools over the others.
Lastly, given that most people are always on the move, having a mobile app can be a deal breaker for a number of traders. Indeed, it seems as if most mobile apps are becoming increasingly advanced in the types of tools the trader can use to analyse the currency pairs.
Most brokers these days offer a free trial version of their platform. This means that you can register to examine the platform in greater detail.
For many people, including myself, customer service is key. There can be nothing that is more frustrating than tone deaf customer service. It is for this reason that one should consider “testing” the brokerâ€™s customer service.
Is there a live chat option? Is there a direct line? When communicating with the broker prior to investing, how responsive are they? These are all very important signs as to how helpful the broker will be to any queries.
One thing you can be certain of is that if the broker has been dishonest, unhelpful or generally a bad experience for other traders, there is likely to be reviews about it online. What we have tended to notice is that people are more likely to share their experience if it was negative than if it was a positive one.
It therefore makes sense to do your research online. Take a look at broker review sites as well as forums. Read what the people are saying about the customer service, withdrawal policies as well as platform functionality. You can also see how the broker tends to respond to these angry customers on the forum.
Of course, there are a number of clients who tend to get angry rather easily and create furore unnecessarily. It is therefore important to use your discretion when sorting through the reviews.
Choosing the best online broker can indeed be a difficult task. However, as we have shown, one has to take the time to carefully examine the offer being presented by the broker and do the adequate due diligence.
This should not be a daunting task and just requires you to invest the same research that you do while choosing stocks to selecting a broker.
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