This article looks at the aspects you should consider when choosing forex brokers.
Before you can commence trading, you have to find a broker. There are many forex brokers available in this market, but there are a few factors you have to consider before you make your final decision.
Factors to Consider
Forex brokers normally have a relationship with large banks or financial institutions because of the leverage they provide. You should check if the forex broker is registered with the regulatory body in the country where it is based. This could protect your funds in future.
Most brokers offer at least two types of accounts. The smaller one is normally the mini account, but some brokers also offer a micro account. The standard account is the most common trading account, however, if you are a beginner in the market you should consider opening a mini account until you have gained sufficient experience to trade a standard account. Some brokers offer premium accounts, which normally require higher initial investment amounts. However, you normally receive better service and additional perks because of the higher investment. You should ensure that you receive the best service and additional perks for your level of investment.
The spread is the variance between the buying price and the selling price of a currency pair. Forex brokers normally do not charge commissions and this difference is the way in which they make money. When you compare brokers, you will find that the spreads differ considerably. You should look for low spreads as you will save money that way.
Due to the small movements in currency price, leverage is necessary in this financial market. Leverage is the amount your broker is willing to lend you to enable you to trade. Leverage ratios vary from broker to broker. If you do not have a huge amount to invest, you need to find a broker that offers high leverage. If you do not have this problem with investment capital, you should look for a broker that offers a range of leverage options. You may prefer to use less leverage as it brings down your risk level if your intention is to trade the exotic currency pairs.
Brokers offer various trading platforms for their clients. The platforms vary in the range of tools and reports it has on offer. Before you register with a broker, you should test the trading platform to ensure that it is simple to use and that it is suitable for your strategy and style.
What to Be Aware of with Forex Brokers
You should be aware of some shady acts that some brokers commit. Sniping is one of them. This is where your broker sells off or prematurely buys near predetermined levels. This provides him or her with a wider profit margin. You should also be aware of the broker’s margin rules. When you are using leverage, your broker often has a say in how your trades are handled. Some brokers will prematurely close your trades which could cost you. This sometimes happens even if you have funds in your trading account.
To ensure that you are ripped off by your broker, you should check on reviews and recommendations by other traders.