The most critical choice you’ll need to make once you’ve made up your mind to start trading on the forex market is which forex broker to work with. It can take a lot of time and research to figure out the difference between the services offered by different brokers. Numerous online forex brokers are competing for your business if you trade on the foreign exchange market. If you visit any financial news website, you’ll probably be flooded with a storm of online adverts from forex brokers. The following factors should be considered before opening an account with any Broker.
Forex Trading through international web-based and mobile-based applications is not legal in every part of the world. It is wise to make sure the Broker you are choosing is registered and following international regulations. As there are currencies traded in the International Forex Market from all over the world therefore it is not easy for a single country to ensure legal compliance. As a result, numerous organizations around the world make sure forex brokers follow accepted industry standards and offer retail traders a safe and trustworthy environment to invest in the currency markets.
The Financial Conduct Authority (FCA) is a British regulatory body to regulate the Forex Market and the Forex Brokers in the United Kingdom. In the United States of America, there are two main regulatory bodies for managing the Forex Industry. The Commodity Futures Trading Commission (CTFC) regulates the commodity futures and options markets open to retail traders in the American FX market. Whereas to work in the retail forex industry, all active forex brokers in America must join the National Futures Association (NFA). These self-regulatory organizations work hard to safeguard the credibility of the forex market. By sorting out unauthorized forex trading and brokerage organizations, they aim to assist retail traders in avoiding a situation where they can get ripped off of their money due to scams.
Receiving and Sending Payments
To activate a Forex Trading Account, a trader needs to deposit an initial amount in the Brokers account. Different brokers have different requirements for minimum deposits generally starting from $5 to $50 depending on the account type. Account holders may be able to fund their accounts online through a broker by using different payment options including bank transfers and online applications.
If the Brokers are not following international regulations and standards, then withdrawals can be difficult from the account. These brokers can have limited options for withdrawals like only some specific apps. The brokers can ask you to wait for a couple of days for receiving the amount. It is also important to consider that the Brokers may charge a service fee when the cash amount is moved in or out of the Trading Account.
Since forex trading takes place around the clock, a broker’s customer support team should be accessible at all times. Also, take into account how simple it is to reach a real person on the phone and get an idea of how much wait time is required to contact anybody in the Customer Support team.
An easily reachable customer care helpline will be your best buddy when you initially start trading forex. Since trading in forex is not strictly regulated in all countries and takes place continuously, a broker should be able to offer you any support you require whenever you need it. The customer Support helpline should be active 24/7 for at least 5 days of the trading so that the broker can be timely notified about any undesired situation.
The market reputation of any Forex Broker is a very important factor to be considered. Research how much the account holders trust the broker. The information can be gathered from different online forums and chat groups. Social media accounts and pages are great places to read about the public sentiments and reviews of a particular broker. If a broker is providing good quality services, then the reviews and market reputation of the Broker would be very positive.
Forex Spreads and Broker Commission
The spread, which is the distinction between a currency pair’s bid and ask prices, can be charged by a broker who accepts commissions at a set percentage. Many brokers who do not charge commissions make their money by using bigger spreads. Be aware of your broker’s revenue sources and compare prices.
For instance, the spread might be constant at three pips (a pip is the smallest change in the price of a currency pair) or it might vary based on the turbulence of the market. Making a profit can be more challenging the greater the spread is. Spreads on popular trading pairs are generally lower as compared to currency pairs that have low trading volumes.
Leverage Offered to Account Holders
Participants in forex trading may have access to leverage made available in their margin account. Different brokers have different leverage options and policies. For instance, a trader with a $100 account size and 100:1 leverage can hold a stake worth $10,000. Some brokers even provide leverage of up to 200:1. With successful positions, leverage benefits a trader because the likelihood of profit is substantially increased. Leverage, however, can swiftly wipe out a trader’s account because it increases the likelihood of losses. It is necessary to be very cautious when using leverage.
Accessibility of Currency Pairs
Many currency pairs are offered for trading but not all of them have high liquidity and do not receive a lot of consideration from traders. Therefore, the Broker may be offering only a few pairs for trading that have high liquidity. These pairs are always in the limelight such as the currency pairs with US Dollars, Pounds, or Euro.
You can find forex brokers who will provide you with a wide range of currency pairings, nevertheless, you should make sure that your broker primarily provides you with the pairs that you are interested in trading.
Features of Trading Platform
Trading tools and software’s connect you to the Forex Market place where different currency pairs are traded. The software and platform your broker provides must have all the essential tools for trading, this implies that it should have the fundamental analytical and technological capabilities required. You should also make sure that trades can be entered and exited without difficulty. The platform you use should be well-designed and typically feature obvious options that let you buy and sell the currency pairs within a minimum time.
A platform designed on old technology can be slow and can have fewer features that could cause you to make several costly mistakes. The platform should be extremely adaptable and should have trade alerts. Reputable brokers have free access to a demo account. You can practice all the features and tools of the trading platform by using a demo account before starting to trade with the actual amount.