Finding a suitable Forex broker is the first step towards a successful online trading experience. Although this task may seem difficult at first, there are a number of brokers’ features that can prove critical to your final decision. We have tried to limit the list to the seven most important things that you should look for in a Forex broker.
1. Forex Account Types
If you are just starting to trade Forex with a broker, you will have to decide on the type of account you wish to open. Account types are based on the amount deposited and have different names like micro account, mini account, standard account and VIP account etc. Each of them has a minimum deposit and minimum lots requirements. For example, the standard lot has 100 000 units, while owners of micro and mini accounts are allowed to trade with lots that are equal to 10 000 or even 1000 units. The leverage is also different for each account type and can be anywhere from 1:1 to 1000:1. Check out what account types are offered by a broker to see if you find one that matches your requirements.
2. Forex Broker Types
Forex trading allows you to trade with brokers and dealers. Simply put, brokers are the middlemen between individual traders and market makers. They process your orders by computer systems and this is called a Non Dealing Desk. The spreads that are offered to traders may be fixed or variable, and sometimes the brokers earn their commission as a percentage of the spread (e.g. $5 per trading lot). Dealers are the market makers and they have a Dealing Desk which processes the orders. The ECN model is also popular and it gives retail traders access to a pool of offers that are quoted directly by the market makers, which results in very low spreads.
3. Customer Service
Since Forex is traded 24 hours a day it is expected that your broker can offer you an uninterrupted customer service. You can test the availability of their customer support team by trying to contact them by all communication channels available. It is important to get an answer in a short period of time and this is especially true for the live chat service. Technical problems may sometimes occur and you don’t want to wait hours before you get help. Other things to consider before registering an account with a Forex broker are the quality, speed and politeness of the customer service.
4. Broker Regulation
A license from a regulatory body is an important accreditation for a Forex broker. Although doing business with a regulated broker is no guarantee of problem-free trading, it can serve as an insurance against potential fraud issues. It is wise to check where the company is based because the legislation requirements for financial registration vary from one country to another. And, secondly, because the political and economic situation can greatly affect the financial stability of the respective state.
5. Deposit and Withdrawal Methods
Funding and withdrawing money from your account is very important. You should find out what funding methods the broker offers. For example, almost all brokers accept Credit/Debit cards, Bank Wire transfers, Skrill (Moneybookers), and PayPal. It’s recommended that you check what are all the available funding methods and what fees are applied for each method. Also, check out if the broker has any minimum deposit and withdrawal requirements.
6. Forex Bonuses
Most brokers offer bonuses to their new clients, which is a great way to increase your trading capital. For example, brokers might give up to 30% or 50% bonus on your first deposit. This means that the bonus amount will be added right away into your trading account and you can use it for trading. Brokers usually allow you to later withdraw the bonus if you reach a certain trading volume. It’s recommended to read the broker’s bonus terms and conditions so you can understand all the advantages and restrictions that come with accepting a bonus.
7. Margin Call and Leverage
Before making orders with any broker you have to be aware of their margin call requirements. As you probably know, the Forex broker has the right to issue a margin call when the margin in our trading account becomes insufficient. The rules that are applied in such situations may differ between brokers who may prefer to close the investor’s deals or ask him to increase the margin. Leverage is also important and you need to choose the level that best suits your trading needs and abilities.
As there are hundreds of Forex brokers out there, it’s important to choose a reliable broker who has all the features you are looking for. Once you’ve chosen a broker you’re one step closer to having a successful trading experience.
This post was provided by LiteForex, a leading Forex and CFD Broker.
If you want to get news of the most recent updates to our guides or anything else related to Forex trading, you can subscribe to our monthly newsletter.