Choosing the Best Forex Trading Broker
Forex trading can be a risky business. While hundreds of people have gained millions in profits through this trade, others have also experienced great loss in it. As with any kind of investment, it all boils down to making sound decisions in forex trading.
These sound decisions actually start with choosing a good forex trading broker. Without one, your trade could instantly turn into an unlucky throw of a dice, so to speak. This is especially true if you’re a beginning investor who’s looking for a reliable forex trading advice. If you wish not to trade in the dark, read on to find out what to look for in a forex trading broker, where to find the best one, and how to establish a professional relationship with them.
Here are some pointers to guide you:
Experience, they say, is the best teacher. As with any profession, forex trading brokers get better with long experience in the trading arena. That’s why this is the first thing to look for in a broker: a proven track record. Otherwise, you’ll find it hard to trust the advice of a broker.
The account type is the second thing to take into consideration. Be sure to check if the forex trading broker has an account that offers sufficient liquidity. What else can be a better gauge for this than your expected amount of investment? If, for example, you expect to trade $70,000, it would be unwise to go with a broker who holds smaller accounts. The key is to find a broker with both financial stability and sufficient liquidity for your investments.
Some forex trading brokers are better salesmen than performers. Simply put, their promises of premier service and reliability are nothing but lip service. So you won’t fall for this trap, go on a trial with a broker. Put the 24-hour support to the test by finding out how long the broker can get back to you when you have a question or issue to clarify. Make sure that the broker can be reached both via phone and the Internet. Through a trial, you can find out if your forex trading broker gives automatic execution. This is a good way to know if the broker provides dealing tools that are important during the trading process. There’s nothing like having a broker that offers real-time charts, real-time data and news, and technical analysis.
Leverage is one big word in the forex trading world. It comes as a ratio between the total capital available for you to trade and your actual capital. The more leverage you have, the more you can increase your potential profits. By choosing a trading broker with a higher margin, you get more leverage. For instance, if your broker offers a leverage of 300:1, this means they can offer $300 for every $1 of your actual capital. When choosing a broker, a good guiding point is to make sure that he or she offers you at least a leverage of 200:1.
Bigger leverage, though, means higher risk in losing money. This is where a guaranteed stop comes into the picture. Go with a broker that provides guaranteed stop protection and negative balance protection.
Type of currency pair
Next, you must take into account the currency pair or pairs you expect to trade. It’s just a matter of finding a broker that offers the kind of currencies you want to trade.
The times at which you trade also play a big role in choosing your forex broker. This determines the spread (the difference of the buying price from the selling price), which varies at different times of the trade. For instance, if you expect to trade off market times, you should select a broker that offers a fixed spread. In contrast, if you want to trade during peak hours, you’ll do well in selecting a broker with variable rate spreads. By going on a trial with two or more brokers that offer different spreads, you can better decide on which broker gives better value for your money.
The trading platform itself gives you an idea as to whether or not you’re dealing with a reliable forex broker. Select a platform with such features as limit and stop orders and one-cancels-other orders. Hidden charges can be a problem with some forex brokers. That’s why you should make sure your transaction cost covers only the currency spread and no extra fees or commissions.
Check the location of your forex trading broker. Their location actually has significant tax and legal consequences since regulations vary in different jurisdictions. You can make better comparisons of forex brokers by consulting your legal, tax, or financial advisor.
Finding the best one
Learn from other people’s experience. One good way to make sure you’re choosing a good broker is to find people who have had experience with good brokers themselves. Ask for referrals from friends. If none of your friends or acquaintances are into forex trading, then you can ask for client references from a broker. You can also visit online forums. Such communities are great venues to know which forex trading brokers are truly reliable.
Once you have chosen a good broker for the trade, it’s time to establish a professional relationship with them. After all, making good money is usually borne out of good relationships. While you should look for a forex trading broker who’s available 24/7, you yourself should be available either through phone or the Internet. From the very start, let them know when they can call or email you. This is crucial since you often have to make fast decisions in the trade. It’s important to be open to your broker, especially when you’re not sure about the kind of deals you make. It can be helpful to ask questions when you have doubts about matters.
Do your own homework. Any broker would find you annoying if you rely too much on his or her skills. While it’s important that you trust your broker when he or she gives you advice or suggestions, you’ll do well in trusting your broker while researching on the side about information that can affect your own investments. Researching means regularly reading forex charts and being in the know about the latest economic and political issues.
Stick to the trade. It’s best to limit conversations with your forex trading broker to topics related to your investments. Getting too personal is never a good way to have business with them.
Misses and finds
Finding the perfect forex trader is tough but possible. Remember that you’re entrusting your hard-earned money to a broker, so there’s no room for shortcuts, or you’ll find yourself missing the great profits of the trade.