One of the most difficult decisions that a forex trader would have to face is choosing which forex broker to go with. If you perform a quick search over the internet, you will surely find a lot of brokers to choose from. However, the thing is, it isn’t easy to find the best forex broker and to spot the ones that you should avoid.
So here are some guidelines when choosing a broker that will give you a good forex trading experience:
Make sure that the forex broker that you are choosing is regulated with the relevant authority. For example, if it is based in the United States, the broker must be regulated by the Commodity Futures Trading Commission (CFTC) or National Futures Association (NFA). When you decide to choose an offshore broker that is not regulated, you are taking a big risk and there’s a possibility that you may not see your money again.
The leverage that each forex broker offers to traders vary greatly. Some brokers only offer 100:1 leverage, while others can offer as much as 400:1. For some traders, a 100:1 leverage is more than enough, but if you are a huge risk taker, then you might want to go with brokers that offer higher amounts of leverage.
For long-term traders who normally use the daily charts or 4-hour trading charts, the spreads are not much of an issue when choosing a forex broker. However, if you tend to trade the shorter time frames, your points gains per trade will be a lot less and the spreads will eat into your gains. With this, as a rule of thumb, go for a broker that offer spreads of around 2-3 pips for the GBP/USD and EUR/USD pairs and not more than 4 pips.
When you open an account with a broker, you will usually be provided with a trading or charting software. If you want to use more advanced charts, choose the forex broker that provides the popular Metatrader 4 Platform or ProRealTime. Otherwise, you will have to shed some extra cash in order to gain access to some decent charts from somewhere else.
Aside from the trading platform, you should also consider the other services that can be provided by the forex broker. For instance, you might want to choose those with daily fundamental analysis, technical analysis, as well as those who provide excellent customer support and educational materials that can be of great help to you as a trader.
Client Reviews and Feedback
Before opening an account with a forex broker, it is very important to conduct your own research and find out what other forex traders have to say about the company. There are a lot of websites where traders can post their reviews for forex brokers, and there are forex forums as well. Obviously, you have to choose those that have more positive comments than negative feedback.
By taking into consideration the mentioned factors, it would be much easier for you to decide which broker to choose. Furthermore, you have to keep in mind that selecting the most suitable broker would also depend on your trading style and preference.