One of the toughest decisions that a trader will make when preparing to trade Forex is which broker to choose. There are currently hundreds of FX brokers in operation, which can make the selection process rather tough. Some are of course better than others, so, how do you choose? The following list will tell you exactly what to look for when screening brokers.
Anyone who has ever traded (and most who have not) have heard of regulation. Working with a regulated broker does provide some peace of mind. However, it is not always safe to assume that all unregulated brokers are bad. The fact is, some are quite good. If you are considering trading with a broker that is not yet regulated, ask if funds are segregated. If they are, you can consider that a green light to find out more about that broker and consider using them.
Traders who primarily use 4-hour or daily charts may not consider spreads to be of great importance. However, those who plan on trading with shorter time-frames do need to pay attention to the spreads that are being offered by a broker. Competition among brokers is intense, and as a result, there are some great spreads being offered.
Leverage amounts can vary quite a bit from broker to broker. Leverage as high as 500:1 may be offered. Keep in mind that higher risk comes with higher leverage, but if you are perfectly fine with that, feel free to seek out a broker that offers higher leverage amounts.
4. Demo Accounts
New to FX trading? If so, please consider creating a demo account. These are practice accounts which allow you to trade within a trading platform, risk-free. Not only do they assist with the learning process, but they also give you the chance to test out a specific broker. Most reputable Forex brokers now offer demo accounts to prospective clients.
5. Trade Size Options
If you want to avoid financial risk while learning to trade well, pay special attention to the allowed trade sizes. If you want to trade mini lots, micro lots and generally smaller positions, be sure to ask the broker what the smallest allowed trade size is. Brokers such as JAFX currently allow traders to trade micro lots.
6. Minimum Deposit Amount
Nearly every broker has a minimum deposit requirement. However, some have the minimum set very low. If you want to test the deposit and withdrawal process of a broker, it is not a bad idea to deposit a small amount initially. Pay attention to withdrawal fees though, as those could exceed your deposit amount.
7. Charting Software
Most brokers offer the MetaTrader trading platform. There should be no charge to access this highly popular trading software, and it will include a charting package. There are other charting software options out there, so if you do not want to use MT4 (or 5) for some reason, you may need to expand your broker search.
The fact of the matter is that the perfect Forex broker does not exist, but do not let this discourage you, as there are some excellent ones. Broker reviews can provide some insight, as can social media. Commit to doing some homework and your broker selection is sure to be the right one.