What To Look For In Forex Brokers?
According to research done in 2016 by Finance Feed there were 1,231 brokers on the MetaTrader 4 platform, fairly old and some fairly new. This list included only those of retail Forex brokers (non-institutional).
What makes a good Forex broker?
You would look for several things and we will discuss them here…
1. Low spreads/ low commission
Commission is the fee the broker charges for holding your trade and for using their platform. The amounts can vary from broker to broker however, they aren’t absorbent prices in the Forex market. If they are, RUN!
Spread is the difference between the bid (sell) price and the asking (buy) price of a currency pair. That is the amount the broker makes. Usually, this is a small cost, however, it can be extremely unreasonable, almost to the point where it is unprofitable to place a trade (dependent on the volatility of the market). You usually see higher spreads with your exotic pairs (i.e. GBPZAR or USDMXN etc.).
Why would you want a broker with low spreads or low commissions? Simply so that you can maximize the profits you make in the market, and not have the broker take away from all your hard work. Somewhat making trading worthwhile. It also indicates that volatility is low and the liquidity is a particular session is high.
If you aren’t careful spread can cause margin calls!!
If you would like to learn how to calculate spread head to Investopedia.
2. Deposit and Withdrawal Time
Forex is a business to traders. It is your personal business that can either make a profit or a loss at the end of the month. Imagine not being paid on time because something within the system was slow or not working? You’d probably be quite upset, justifiably so!
That is why you need a broker that allows instant deposits and instance withdrawals or at least withdrawals that take no longer than a day. Withdrawals that can be made on the weekend too!
As a Forex trader, you should be allowed to take your money as you please, when you please. It is your money that you worked hard for 24/5! You deserve to spoil yourself and your family and be able to take care of the important things in your life! HASSLE-FREE!
Imagine putting your money to work in a place that is not safe? Where your money could just disappear in a flash? Where instead of making money you end up owing the broker?
That wouldn’t be pleasant, would it now? Well, you need to look for a Forex broker that is under the regulatory agencies across the world. The regulatory agencies separate the trustworthy from the fraudulent brokers in the world.
Make sure that the broker is reflected on the regulatory board. To name a few countries that have corresponding bodies; USA, Australia, Switzerland, Canada, the UK, France, and Germany to name a couple.
4. User-friendly Trading Platform
Most of the trading transactions are made through the brokers’ platform and if you struggle to get used to a platform then it is usually not a good idea to stick with that particular broker.
Always check things such as whether or not there are useful chart tools, is there a news feed and how quickly does information get priced in (the quicker the better), and is it making your trading process easier or more burdensome?
This points back to the questions you need to ask from the 4th reason. You need to be able to place a trade at your desired price or at least micro-pips within that price. The speed at which you can execute a trade can be the difference between a 20 pip stop and a 50 pip stop losses and both can have very different outcomes!
6. Customer Service
It is important as you grow your business, your capital in the Forex markets, and to do this you should receive the best service available. I always think there are a lot of brokers that will give you the best service until you become a client but after that point, your business isn’t important to them. Those are the brokers you should stay away from!
You need a broker you can call when you are facing a couple of issues and a broker that gets on top of the issues quickly so that you can get back to running your business the way you please because time is money in the markets! The after-sale support you receive from the broker is as important as the before-sale support.
Now, which brokers meet all the above criteria? Here are my top 3 recommended brokers:
I hope this article gives you clarity as to what to look for in a good broker and why it is important to search and be with a good broker.
Your business is at stake, so protect it and always look for the best parts that make it function to the best of its ability.
Happy Trading Traders.