Congratulations.
You deserve a pat on the back.
A lot of people like the idea of investing in the forex market. They’ll talk a big game about how they’ll invest in the future or about how awesome it is as a money-making opportunity. But when push comes to shove, none of these folks have any follow-through.
But that’s not you.
Not only have you learned enough about trading to have developed a strategy, but you’re actively looking for a forex broker.
And you deserve to be recognized for that.
However, with so many forex brokers grabbing traders by the shoulders and screaming, “Choose us!”, it can be hard to rise above the noise and choose a broker.
Fortunately, we’ve put together a guide that will give you an overview of 5 key things that you should always consider when choosing between forex trading brokers. Just keep reading.
Post Contents
1. Ask the Hard Questions About Regulations, Compliance, and Fund Security
First things first, the number one concern that you should have as a trader is making sure that your funds and your personal information are in good hands. The sad reality is that a flashy or well-designed website isn’t going to automatically make a forex broker legitimate.
To that end, there are some important questions that you will want to ask before you make that first deposit:
Question #1: Is This Broker Regulated?
According to Investopedia, the job of making sure the forex market is regulated, at least in the United States, falls primarily on one institution: the National Futures Association.
This organization does due diligence on brokers, regulates record-keeping, and works to fight against fraud.
As a general rule of thumb, regulated forex brokers will usually say that they’re regulated by the NFA somewhere on their site. And in practice, this means that you can expect a certain standard of professionalism on the part of these brokers on a day-to-day basis.
Question #2: What Is This Broker’s Track Record With Compliance?
It’s not enough for a broker to be regulated. You also want your broker to have a solid industry track record.
The good news is that because most brokers want to protect their reputations in order to attract more traders, you’re unlikely to find an NFA-regulated broker who is caught up in financial scandals.
However, when it comes to choosing a broker, it’s better to be safe than sorry. And a part of performing that due diligence on your end is reviewing the broker’s history and making sure that there are no compliance issues before you make the deposit.
Question #3: How Secure Are Your Funds?
According to Review 42, 2.5 billion accounts were hacked in 2018.
Because we’re so used to seeing online forex brokers left, right, and center, it can be easy to forget that these companies are dealing with sensitive financial information at every hour of the day. This makes it even more important that you take steps to verify that your funds will be secure.
The quickest way to do that is to review the broker’s policies until you find an answer to the question, “If something were to happen to my money, what options would I have?”
Many brokers offer different forms of account insurance and added protection for your funds, so you may not have much to worry about with a reputable broker. However, it never hurts to take a bit of extra time to ensure that your money is protected.
2. Pay Close Attention To the Fees
Believe it or not, it’s possible to time a trade perfectly and still lose money on the trade.
How?
Because as a trader, you can’t just look at the spreads or the low prices and calculate your profits based on that. You have to consider the underlying costs of trading with a particular broker.
Are there currency conversion fees that you’re expected to pay if you trade in a foreign currency? Are the spreads often high? Is there often a delay between the time you enter the trade and the moment when the trade is executed?
To be clear, what counts as an expensive fee is somewhat relative. If you’re putting in over $10,000 a trade, you’re probably not going to be upset by a $15 fee. In addition, a lot of financial management can be fixed by choosing a broker who offers no deposit bonus forex accounts. However, it’s still worth your while to look at commissions and fees when calculating your profits in order to determine whether or not the expense is worth your while.
3. Make Sure Your Broker Offers Excellent Customer Service
Nobody ever plans to be stranded during their trading, but sometimes things can go sideways at unexpected times.
Funding could end up being unreasonably delayed. There could be a problem hooking up your bank account or withdrawing your funds. Maybe you have to submit some additional documentation due to some sort of a snafu with the registration process.
Regardless of where your need for customer service starts, there’s one thing you need to remember:
This is your money that’s at stake.
If you entrust your money to the type of broker who leaves you hanging as soon as you make a deposit, it becomes a lot harder to get what you need from a nonresponsive and borderline nonexistent customer service team.
4. Consider Platform Features
Picture this.
While you’re preparing for your next-day trading session, you stumble upon the most amazing momentum trade you’ve ever seen in your life.
This isn’t just good in the “Solid returns on a solid trade.” sense of the term. This is, “I am quitting my day job tomorrow.” money.
You run to your computer with the speed of an Olympic sprinter, you fire up your trading software, and suddenly you find yourself clicking on windows, rearranging charts, and just generally working way too hard to execute your trade.
Now, if you’re new to the platform, this might not seem like a big deal. Maybe it’ll get better.
But the truth is, that dealing with counterintuitive software can really take a bite out of your productivity if you’re not careful.
This one can be tricky to spot because there are no right or wrong answers when it comes to most platform issues. Some traders find workarounds or use other services that they like better for their charting so it doesn’t really matter to them. Meanwhile, others want their broker to provide everything they need so that the minute they open up their accounts, all of the information they’re looking for is there and easily accessible.
The key here is to understand your preferences and to make sure that you can live with the trading platform that your forex broker has to offer.
5. Make Sure That Your Forex Broker Is a Good Fit for Your Trading Style
Something else to be aware of is the fact that the broker that all of your trading friends love and adore may turn out to be your worst trading nightmare.
How is it that even the most experienced traders can disagree so strongly on what “the best forex broker” looks like?
Often it comes down to trading style.
For example, some traders will take the advice that Forbes credited to Warren Buffet, and will buy and hold a few reliable stocks for ages. Others will scalp as many trades as they can during the day. If you’re the kind of trader who holds positions for weeks or months at a time, a slightly larger commission may not bother you. But for many day traders, a higher fee is outrageous because it cuts too deeply into the smaller profits that they try to take several times a day.
You don’t want to end up with a broker who checks every box but is still a terrible fit in terms of how you like to trade. This is part of the reason why many folks recommend that you start with a practice account and then open a small account to get a sense of how a broker works before going all in.
On a fundamental level, the time that you take to assess that fit can make a huge difference to your bottom line.
How to Choose The Right Forex Broker
When you get right down to it, there’s a lot to like about being a forex trader.
You don’t have to start off with massive amounts of money to make money. You can trade on higher margins. And you have a legit opportunity to make money in one of the liveliest markets in all of trading.
In trading, we often talk about the importance of picking the right trades, having discipline, and having a solid risk management strategy. But it’s also important to understand how the right forex broker account can impact your profitability in a positive way.
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