How To Choose Forex Broker

  • Home
  • >
  • How To Choose Forex Broker

Becoming successful in forex trading requires a trustworthy forex broker. So, how do you take that first step in finding the right broker for you and your trading style? 

Here’s our top tips

  • You can’t just close your eyes and pick a name! There are quite a few things to consider so first do your research. 
  • Is the broker licensed/registered? This does, of course, vary from country to country, but some light internet research should be enough for you to figure out what certifications and regulations your forex broker needs to comply with in your specific region. If a broker isn’t regulated by a reputable financial authority, you should consider a different one. 
  • How do they operate? While this can be more important for forex trading for quick profits on limited pips, it’s a good question for any trading strategy. Does the forex broker use a non-dealing or a dealing desk? Are spreads fixed or not? 
  • What leverage ratio is being offered? Each forex broker will have different margin requirements, which may affect your strategy. While this may be too in-depth for this article, you need to be certain that the leverage offered is suitable for your forex trading style. Less is more if you’re in doubt. 
  • What risk capital is needed? Hopefully you are starting with a demo account, but knowing this going in is critical. Micro lots are always a good choice for newbies unless you have over $2,000 to put on the table. 
  • Are you thinking of holding positions overnight? Then, you need to find out how the forex broker handles swaps/overnight interest. 
  • Does your broker of choice offer any other services that you may require such as education resources, or trading signals? 

Now we know what to look for, and the information we need to get started. What should we do next? 

How do I pick a good forex broker?

Reach out to brokers at this point and find out if they fit the forex trading strategy you need. Get yourself a shortlist of the ones who tick all the right boxes for what you need. 

Keep in mind that you can open a demo account to familiarize yourself with a broker’s platform before investing real money. Don’t focus on one broker just yet. Rather open two or even three demo accounts with the ‘most likely suspects’ from your list. This allows you to experience each Forex trading platform for yourself, and get to learn the ins-and-outs of each. Remember that there will be slight differences between ‘live’ and demo account, but not so much that you can’t get a good idea if this is the trading platform and the forex broker for you. Reach out to their customer service at this stage too, as having reliable and friendly customer support on your side is critical. 

As you sort through this testing stage, you will start to appreciate which platform and broker is the right one for you. You’ll also get a good sense of how each brokerage reacts, and whether this is the right forex broker for your investment goals. 

Different services 

A forex broker is a company that may offer investment or trading services – depending on their license – to retail or institutional traders. They facilitate online trading by connecting traders to the live market prices and their main purpose is to help you with your trading needs and enable you to achieve success in this industry.  

As the number of people getting involved with currency trading continues to grow, so does the number of forex brokers that can provide better terms and trading conditions.  

Each forex broker provides different levels of assistance to their traders. But there are several similarities in the services that they offer. Some of the services that a forex broker can provide are:  

  • Analysis of real-time news feeds and price charts, which helps traders better inform their trading strategy.  
  • Some forex brokers may offer a Signals service where traders can access detailed information on the best opportunities of the day as well as when to buy or sell a specific asset.  
  • Trading platforms for desktop and mobile as well as copy trading platforms where traders can exchange trading ideas or even copy or invest in each other’s strategy.   
  • If your broker of choice offers managed accounts, you can opt to let them assign you with a trader who will manage your account for you and trade on your behalf.  
  • Forex brokers assist you with your trading needs in exchange for a small commission that is paid when you open a position in the market. It is therefore important to keep in mind that all the final decisions on how to act are still yours to make. So, choosing the best forex broker is crucial to your success in the foreign exchange industry.  

Choosing the right broker  

When choosing the right broker, there are several things to be considered. First is the broker’s reputation. One may gauge the broker’s good standing by trying to learn more about their background. The broker must be ready to give you information on their track record such as how many clients they have, and the methods they use for their transactions. Different companies have different payment methods available for funding your account, and it is best to choose one that is both convenient and secure. It is also important to find out which is the financial authority or watchdog that your broker is licensed by, and where they are located.  

You may also opt to go with brokers who allow you to practice trading using a demo account. A demo account lets you familiarize yourself with the markets as well as the broker’s trading platform and trading conditions without risking your money. This way, you can get a feel of how their platform works and if the transactions run smoothly. 

What to consider when choosing a broker 

Spread and leverage are also very important things to consider when choosing your forex broker. Each broker gives you their spread and leverage, and these values can also help you when making your decision.   

It is also important to know how easy it is to get in touch with their customer service. You may encounter some issues along the way, and it would be good to know that they have a reliable customer service system in place and that they are ready to answer your questions or complaints. Some broker companies provide 24/7 support by phone, email, and live chat.  

Finally, when choosing the right forex broker, you must be aware of certain marketing strategies that some companies utilize to lure in traders. They may try to get your attention by stating that trading on the foreign exchange market is very easy, with minimal or no risks involved. These brokers should be avoided since the forex industry is indeed quite risky. Exchange rates and asset prices change daily and are very unpredictable. It would be misleading to say that there are minimal or no risks involved in online trading or any investment for that matter.  

By understanding all of the services that each broker can provide, and researching their background and reputation, you can make an informed decision. Once you’ve done your research, and tried out the different platforms or services that each broker provides you will eventually be able to tell which is the most favourable broker for you.   

Remember that while forex brokers can certainly guide you and assist you to become very successful in this industry, the final decision on how you will invest your money is entirely up to you.