Forex trading is one of the most accepted ways of making money. One of the primary requirements for successful trading is to choose a good brokerage company. Choosing the best broker requires a lot of research and patience. To help beginner traders we have identified some of the critical things that every trader should evaluate when selecting a broker with a list of the very best Forex brokers in the market.
Choosing A Forex Broker As A Beginner Trader
The Forex market is the world’s largest market with a daily turnover exceeding $4 trillion. Even though it’s the largest market in the world, there is no central exchange for it. So, Forex traders have to rely on the services of a Forex broker to affect a trade. Here is what you need to consider when choosing a FX broker:
Regulatory Oversight
First, check if the broker is regulated. These regulatory agencies primary functions are to protect the interest of investors and to develop the rules that dictate how Forex brokers should conduct their operations.
Hence before opening a trading account with a Forex broker, ensure that one of the following regulatory agencies below regulate it:
- Australia: Australian Securities and Investment Commission (ASIC)
- Canada: Autorité des Marchés Financiers (AMF)
- Cyprus: Cyprus Securities and Exchange Commission (CySEC)
- France: Autorité des Marchés Financiers (AMF)
- Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)
- Switzerland: Swiss Federal Banking Commission (SFBC)
- United Kingdom: Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)
- United States: National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC)
The Forex Platform / Software
Next, check their trading platform or software. The trading platform is the trader’s gateway to the Forex market; therefore, you have to ensure the trading platform is dependable and easy to use. Most useful tools for beginners are clear charts and a streaming news source.
A poorly designed trading platform can impede trading which can lead to costly mistakes that’ll cause you more frustration and drain you emotionally. Go for the broker who offers a reliable trading platform like the Sirix WebTrader or the MetaTrader 4 platform.
Commissions and Spreads
Every Forex broker makes his money from commissions or spreads that they charge their clients. The commission is usually a fixed amount per lot traded, or a proportion of the total volume traded, while with Spread based trades, the Forex broker markup a few pips in the difference between the Bid and Ask price. The Spread can be fixed or floating.
The wider the spread, the more difficult it is to make a profit. Even so, frequently traded currency pairs like the EUR/USD or USD/JPY often have very tight spread compared to less commonly traded currency pairs.
Account Types
Every leading Forex broker offers their clients a choice of trading accounts to choose. These accounts are differentiated by the benefits they provide the account holder (but that varies between the different brokers.)
Trading accounts can also change as per the type of spreads which a trader has to pay. Some trading accounts have fixed Spreads while others have variable Spreads. Or they can be commission based trading accounts too.
Deposits and Withdrawals
Every Forex broker in the industry has their policies on how they handle deposits and withdrawals. Some brokers may want their clients to fund their trading accounts by direct bank deposit while others may support various payment methods.
Customer Service
The Forex industry is a 24 hours market. That means the problem could arise at any time that requires the assistance of the customer support team. Nothing is more frustrating than not being able to get assistance when you need it most.
Wrapping up
Finding the perfect broker is not an easy task, especially when you are a beginner trader. To help you out, we collated a list of the best Forex brokers for beginners, and we hope it was helpful?