Choosing a Forex broker is an important step to a success in the Forex trading. Whether you are a beginning trader looking for your first broker or an experienced trader seeking to switch brokers, you will have to be careful in this selection. With the current abundance of the online Forex brokers offering dozens of services, bonuses, and high quality execution, you need to look for the exact features that would fit your trading style, capital requirements, and level of legal regulation. Here is the short list of things for which to look when you choose a Forex broker:
- Terms of Service. The first thing you need to look at before joining a broker is its Terms of Service. They should be free from anything that would put trader's money in danger and should give you freedom to manage a trading account without any serious obstacles. Do not forget to check the ToS to know if the broker forbids your trading style — for example, scalping, news trading, etc.
- Trading platform. Trading via a Forex broker with some lousy platform is a real pain for any trader. Check if the broker's platform is good enough (through the demo trading) before registering a real account. MetaTrader 4 platform is offered by many Forex brokers, and it is one of the best platforms available for online trading.
- Regulation. If the broker claims to be from the USA or UK, or any other country with high level of Forex brokerage regulation, then check the nation's authorities to see if the company is really regulated. Doing due diligence on an offshore company is much harder but trading with an offshore broker has its own advantages and disadvantages as well.
- Spread. Spread will be your main payment to the broker for using its services. Do not overpay for anything — try to find a broker that offers low spreads. For example, trading with a Forex broker with 7 pips spread on the EUR/USD currency pair is really stupid, while the average spread for this pair at other brokers is 1-2 pips. If you find a broker that offers spreads below average, do not forget to read its ToS to see if there are some hidden fees or commission attached.
- Payment methods. Most of the traders deposit and withdraw their trading funds via bank transfer. However, there are plenty of other payment methods that can be used to trade Forex; PayPal and WebMoney are among them. If you prefer electronic payment systems, choose a Forex broker that accepts them.
- Minimum deposit. Trading with small amounts of money will not make you rich, but it is a good way to test out your broker's real account handling before trading big, so the minimum deposit amount ofnbsp;the Forex broker should not be too high. Some of them accept deposits only from $10,000 and higher — that is not a very good practice since many traders would prefer trading with just hundreds of dollars before depositing bigger amounts.
- Additional services. Almost every broker offers additional services nowadays. I, personally, prefer brokers that allow extra instruments for trading in addition to Forex pairs — like metals, indices, or some CFDs. For example, if you trade not very often and prefer long-term trading, you would seek a broker that pays interest on your free margin and offers good overnight interest rate payments on your open positions.
Of course, this list is far from complete as there are many other parameters for judging the broker, and they vary from trader to trader. But you can use this list as a checklist next time you are going to select your new broker or register when you decide to switch from demo to a live account at your current company.
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