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How to Choose a Forex Broker

How to Choose a Forex Broker

Choosing the right Forex broker can be an overwhelming task especially for beginners.

ECN BROKERS

After sharpening your learning trading skills, you need to find a reliable Forex broker. A Forex broker operates as a bridge between retail traders and liquidity providers (commercial banks, central banks, hedge funds, etc.). It is very important to select the right broker.

Here are some basic tips when choosing a Forex broker:

DEMO ACCOUNT

The vast majority of Forex firms offers a demo account to all new clients. This provides a good chance for understanding how the system of opening/closing positions actually works. Moreover, a demo account is also important for testing the trading cost (spreads) and the actual slippage on order execution.

→ Offering a Demo/Practice Account

RELIABILITY AND REGULATION

Retail forex trading is an OTC industry and that means there is no centralized control over the operations of every participant. However, Forex brokers will be forced to follow some rules as long they are regulated by a reliable authority. Here are some key points towards ensuring the reliability of Forex brokerage services:

→ Headquarters country

→ Regulated by a reliable authority (for example FCA UK)

→ Client account segregation (separating client funds from operating funds)

FUNDING METHODS

Make sure a Forex broker supports your desired funding method for both depositing and withdrawing the initial funds and profits. Nowadays, most Forex brokers offer a great variety of funding methods:

□ Cards

□ Bank Wire

□ Internet Wallets (Skrill, Paypal, etc.)

Initial Deposit: Most forex accounts will require a very small initial deposit, as low as $5. Make sure you are aware of how much money you will be required to deposit in order to open a new Forex account.

MINI/MICRO ACCOUNT

Beginners should always seek brokers offering mini/micro accounts, where they can trade tiny positions:

(i) Standard-lot account → 1 full lot equals $100,000

(ii) Mini-lot account → 1 full lot equals $10,000

(iii) Micro-lot account → 1 full lot equals $1,000

TRADING COSTS

Trading cost is always crucial no matter the level of your experience or your trading style.

□ If you plan to trade intraday → focus 100% on the spread you will pay to trade your favorite assets

□ If you plan to maintain your positions for more than 3 days → focus 100% on the overnight rate (SWAP) you will pay for holding overnight your favorite assets

CUSTOMER SERVICE

Customer service is always important as it shows how much a Forex broker respects his clients. Here are some key points:

→ Availability of the desired language for contacting support

→ Instant email response

→ Live-chat service (24/5)

TRADING PLATFORM

The Forex industry’s standard platform is MetaTrader (MT4). MetaTrader is an advanced platform offering extended charting capabilities, automated-trading, a full set of trading orders, and much more. However, if you are a beginner, most likely, you will need to start trading using a more simplified platform, such is a common WebTrader.

□ Beginners → WebTrader platform

□ Advanced Traders → MetaTrader-4 or cTrader platform

 

How to Choose a Forex Broker

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