Are you looking for the best forex brokers? When you feel you are ready to start trading, you need to find a trusted Forex broker that can help you achieve your ambitions. What makes a broker different? If you’re not yet sure what those best currency brokers actually are supposed to do, here’s a short explanation:
- A Forex broker is a company that provides traders with access to a platform that enables them to buy and sell foreign market-related assets such as currencies (which is Forex’ basic principle). However, a currency trading broker (also known as a retail Forex broker) only manages a very small part of the overall volume from the Forex market.
- The foreign exchange market has a daily volume of more than $4 trillion, which makes it the world’s largest financial market. Because there is no central marketplace for the FX market, each and every trader must select a broker to assist them in conducting their main activity.
- As someone who aspires to become a Forex trader, your main objective after finishing your educational process is to decide on a broker whom you can trust. Since there’s a very large and growing number of Forex brokers, your job in finding the right one for your needs might be tricky.
Below you can find the most important 5 steps you need to follow to discover your trusted Forex broker.
The 5 vital steps to find a trusted Forex broker
Trading with the right forex broker is critical to success in the international currency markets. As a currency investor, you may have a specific platform, tool, or research needs that should be met. Understanding your investment style can help determine which FX broker may serve as the best forex broker for you. This article will surface the most important features and/or benefits of selecting one forex broker over another, including discounted commissions, differences in trading account requirements, available research tools and trading platforms, as well as the quality of customer support.
Step #1: Make sure the best currency brokers for you are regulated
The very first thing you must look at when researching best currency brokers is regulatory compliance. For example, a good and reliable U.S broker must be a member of the National Futures Association and registered with the U.S Commodity Futures Trading Commission. If you live in the United Kingdom, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) are the ones to look for. These are just several examples because each country has its personal regulators.
The FX regulators main responsibilities are to create rules, programs and services to provide protection (from manipulation, fraud, and abusive practices) to both the market and it’s participants. These companies also aim to stimulate open, competitive and financially sound markets.
Make sure you check each and every broker for information about their regulations. Be extra careful here: a professional-looking website, with tons of awards and prizes, does not necessarily mean the broker is regulated! It must mention the name and the regulator’s logo (ideally on their homepage).
- The basic criteria to use in choosing a broker are few and simple. Without doubt, your number one priority should be ensuring the safety of your funds.
- Firstly, this means making sure that the broker you choose will not steal your deposit. You can best take care of this by making sure that you only use a broker based in and regulated by a financial authority in a respected financial center.
- Secondly, you need to make sure that even if the broker operates honestly, but goes bankrupt for any reason, that you will be able to recover your deposit. One measure that can be taken here is to only deposit with brokers whose regulators offer deposit protection for clients (such as regulated brokers in the U.K. or Australia, for example).
- This means that even if your broker goes broke, the government will bail you out by paying back your funds up to a certain amount, although it might take some time.
- Beyond that, try to choose a broker with a healthy financial situation and a good reputation. Once you have taken these precautions, you can look at what your potential brokers offer in terms of range of available assets to trade, spreads and commissions, overnight financing charges, and speed and reliability of trade execution – and make your choice accordingly. Source: DailyForex.com
It is extremely important to only trade with regulated brokers. But not all regulated brokers are created equal. It’s hard to find a good Forex broker to work with, especially as you don’t have the option to visit the companies in person. That’s why here at FXEmpire we have done all the research for you so you don’t need to worry about finding a good broker, that leaves you to focus on trading well. Source: FxEmpire.com
Step #2: The best currency brokers should give access to a wide array of account types and account details
Every trusted and reliable Forex broker should have multiple account offerings, amongst which the following are a must:
Extended leverage margins
Because in the Forex market there can be various types of traders, good enough leverage margins are a must. Leverage is basically a loan extended to margin account holders by their brokers. Leverages can start from as low as 30:1 and can go to 200:1 or even further. To help you better understand this, a 50:1 leverage, if your account size is of $1.000, you can hold a position valued at $50.000.
However, leverage is a double-edged sword. For beginner traders, higher leverage is capable of totally destroying their accounts and making them lose all of their money. For more experienced traders, leverage amplifies the potential profits. That’s precisely why multiple leverages levels are mandatory in every respectable Forex’ broker offerings.
Worried about the new ESMA rules? Check out how new leverage regulations affect European Forex traders.
Spreads and commissions – beware!
The primary source of brokers’ money is through spreads and commissions. If they use commissions, that means they charge a stated percentage or the difference between the ask and the bid price of a certain currency pair. The lower the commission, the better for you
The alternative to commissions is called spreads. If a broker states that it doesn’t charge commissions, that means it uses wider spreads, which is often worse because it’s more complicated to make profits.
A ten-minute class that overviews the spread and the basic mechanics of the forex market. Learn why the spread exists, how a profit or loss is calculated and how brokers make their money.
Initial deposit values
The majority of Forex accounts can be funded with deposit values as low as $50. With leverage power, the mirage of big gains is very big and this is precisely why Forex trading appeals to a lot of new investors.
Forex brokers usually offer different types of accounts, such as standard, mini, gold, platinum, etc… The initial deposit requirements differ a lot, so keep a close eye on this too.
The type of account that is right for you depends on a number of factors, including your tolerance for risk, the size of your initial investment and the amount of time you have to trade the forex market on a day-to-day basis. Source: Investopedia.com
Step #3: Check the trading platform thoroughly – and find the best forex brokers
The trading platform is where your trading takes place. This is the main reason why it needs to be simple to use, visually appealing and equipped with a diverse range of up-to-date trading tools.
Additionally, other nice things to have are a customization interface, different order entry types, automated trading options, strategy builders and trading alerts.
Most of the serious and trusted brokers offer free demo accounts. This way, you can get to test their platform’s features without any risk so you can decide if you like it or not.
A demo account is a type of account offered by trading platforms, which is funded with fake money that enables a prospective customer to experiment with the trading platform and its various features, before deciding to set up a real account funded with the customers actual money. Demo accounts are offered by a wide variety of online trading platforms, including stock trading platforms, foreign exchange trading venues and commodities exchanges. Source: Investopedia.com
Step #4: Put the broker’s customer service to the test
Because Forex trading takes place 24 hours a day, it’s mandatory that your chosen broker’s customer support be available all the time. There’s nothing more frustrating than being forced to use the online chat auto-attendant to get your responses.
In order to check it out, I advise you to give them a short phone call. You can analyze their response time, their professionalism and also important information about their trading volume size or longevity in the market. Larger brokers offer better trade execution times and prices.
Step #5: Do they offer any resources and education platform?
Most good currency brokers should also offer some free access to resources that can be helpful for both new and experienced traders. This could be e.g. investor education with videos and courses to create your own learning path, tutorials, videos, online magazines, manuals and guides, and quiz. Some of the best forex brokers could also provide motivational competitions, videos, and forums exclusively for their traders.
Whether you are new to online trading or you simply wish to refresh your knowledge about the bare essentials of forex, the educational courses will lead you through all the steps necessary to master forex trading.
From the basic concepts of currency exchange to the most useful technical and fundamental analysis tools, these forex courses encompass all details that can help you understand how forex trading works so that you can put it into practice with more self-confidence.
Recommended capital when opening a Forex account?
Starting with $500 gives some flexibility in how you can trade; $100 doesn’t. If you want to day trade forex, start with at least $500. No matter what balance you start with, limit risk to 1% of your account balance on each trade. Alter the above scenarios to help determine what your position size should be based on the stop loss level you use and what type of lot (micro, mini or standard) you’re trading.
The amount of starting capital will also affect the income (in dollars). If looking to get an income from trading, then it is better to save up more capital than to try to start with a smaller amount that leaves you disappointed with the income produced and doesn’t compensate you for the time you are putting in. Source: Thebalance.com
Final words – The 5 vital steps to find a trusted Forex broker
One thing is certain: You need to do lots of research to find the best Forex brokers or the best currency brokers that suit your needs. Your job is to find the one whom you can trust putting your funds in, based on the information I provided you with in the lines above. Want to read more about this topic. Check out the brokers I personally use and why.
Research prior to committing to a specific broker is mandatory because it can improve your odds of being successful in a very competitive market like Forex. We hope you found this post helpful, and we would love to hear your comments. Do you have any experience finding the best forex brokers out there? Have you moved between several currency brokers before you found one you can trust?