Saturday, 17 September 2016

How to choose a Broker

If you want to get some more basic information on brokers, and more information on different regulatory bodies that provide oversight for Forex brokers as well as articles that dig deeper into the different aspects on choosing a Forex broker that we talk about on this page, you will find that in our Forex broker tips section.

       The broker’s offer and services

After you have found a broker that you think you can trust with your money, it is time to look at the offer and services you should expect from your broker.
My top list of things to check out include the following:
1.       Spread Margins
2.       Execution of orders
3.       Trading Platform
4.       Support

1. Spread Margins
Forex brokers usually charge a commission on deals by taking part of the bid offer spread, so the tighter their spreads, the more money the trader saves. If your preferred trading strategy is more active than most, then spread margins will be more important for you.

2. Execution of orders
Speed is really important when it comes to execution of orders. You should test his speed and effectiveness with a demo account with the broker you have chosen. More on demo accounts later. In some cases, the demo account may not be a good barometer. You should also check other online reviews to find out if there are “slippage” problems or constant re-quotes from the broker. If the speed and effectiveness is not there, then choose another broker!

3. Check out the trading platform
You need to determine the ease of use and reliability of the broker's trading platform, in addition to the quality of the online market information offered by the broker to its clients. Does the platform need to be downloaded, as with Metatrader4, the most popular and widely used platform on the market? Some downloads are easier than others. Is the platform a proprietary design? This situation may be good or bad. Demo testing can help here, as well. It is not always easy to decide the best forex trading platform since it depends on your needs. Are you on the go and need to access your account via an iPhone or Android device? Some brokers support mobile trading. Others do not.

4. Support
Remember, the Forex market is open 24 hours a day almost 6 days a week, if you count from the opening of the week in Sydney Monday morning until closing in NY Friday afternoon. See the forex market opening times. Different time zones can impact the accessibility of customer support services. If the broker’s support crew is on one side of the globe and you are on the other, you might need support from your broker on a 24-hour basis. We highly recommend that you choose a broker with 24-hour support.

These were our four most important points to review when accessing the capabilities of your prospective broker. It also helps to be aware of the pitfalls that can occur in the Forex industry. Here are a few tips that could alert you to the possibility of questionable business practices and help you to easily discard 
prospective brokers on your short list.

1: What to watch out for
Beware of Unusual Trading Rules
Beware of forex brokers with arcane trading rules, such as giving you a minimum time to hold a position or denying you to “pip hunt”.

2 Beware Outrageous Marketing Claims
There are unscrupulous brokers that will attempt to attract your interest with marketing claims that seem too good to be true. In most cases, be suspicious of claims of high returns, super tight spreads, and professional support that will help you make a fortune in Forex trading. Competition is high, and many brokers will say anything to get your initial deposit. Be wary and sceptical. You are your first line of defence when it comes to preventing fraud.

3 Avoid Brokers That Re-quote
Re-quoting is the situation where your trading platform shows a certain price, and then when the trader goes to deal on it, the platform makes them wait, and then shows them another often worse price.
Excessive slippage on stops
Slippage occurs when an order, usually a stop loss, is not executed by a Forex broker at the rate at which it was placed. Instead, the order is filled at a rate that is usually worse than originally intended by the trader.

4 Front running orders
Front running means that the broker may be holding an order for an especially large commercial transaction and might trade it ahead of or "front run" the order to make money at the client’s expense.
Step 4: Other considerations
You will want to read the prospective broker’s official website and any documents thoroughly to get clear on both their terms and operational rules of the road.

5 We also suggest you give their customer support a test call. You will want to assess the helpfulness and market expertise of the customer service department when assisting you in getting started trading or in case a problem arises. Brokers that fail to answer questions or that put you on hold when you try to call in are best avoided.

6 Withdrawals and Deposits
Make sure that the Forex broker's withdrawal and deposit policies agree with you. Some brokers charge exorbitant fees for bank or wire transfers, while some will even take PayPal.
Also, some brokers can make you wait an agonisingly long time to withdraw your funds. Make sure you have this information before you give them your money.

7 Make use of bonuses
Make sure to check out the prospective broker’s bonus offering. Often they will provide you with some kind of extra bonus with your first deposit. Some of them also offer other types of bonuses for you as a loyal customer. Make sure to understand the terms and conditions connected to the bonus.

8 What type of account to use?
There are demo trading accounts and live trading accounts. We always recommend that you start trading with a demo trading account to check out the trading platform. But you need to understand that there are differences between demo and live trading.
When you are ready to open a live account we recommend that you start trading with a micro account first.

9 Checklist of features
The following list presents many of the more desirable features and services offered by Forex brokers. We have already covered many of these in the above discussion, but not all. This list will help you prioritise your personal needs.
•        Competitive dealing spreads
•        Fast and reliable executions
•        Mobile phone trading support
•        Automated trading support
•        Dependable order execution on stop loss orders
•        Minimal slippage on stops
•        Easy deposits and withdrawals
•        Sign up bonuses and promotions
•        Trading in a wide array of currency pairs
•        Trading in other markets such as gold, silver and crude oil
•        Low initial deposits
•        Instructional material for novice traders
•        Personalized trading strategy and market advice
•        Economic calendars
•        Reuters or AP/Dow Jones financial newswires
•        Forex expert market commentary
•        Calculators and trading tools
•        Technical analysis tools
•        Charting software
•        Size of dealing lots
•        High leverage accounts
•        Competitive rollover fees

Most of these services can be obtained through a variety of online retail Forex brokers, so it is up to you to determine what services you consider important for your personal trading needs. Your goal is to select the broker that best suits your personal trading needs.

Concluding Remarks
As you might expect, the larger the Forex broker, generally the more services the broker can make available to their clients, the tighter their dealing spreads, the more reliable their trading platform and the faster their transaction executions are likely to be. Thus, in general we recommend that you choose one of the larger brokers.

Any qualified Forex broker will provide you with a reliable trading platform, 24-hour customer support during Forex trading hours, charting and technical analysis tools, access to quality Forex news and commentary, competent order execution, competitive dealing spreads and a wide choice of currency pairs to trade. Brokers offering any less than this basic package should not be considered in the selection of a Forex broker, since today’s market offers a broad blend of online retail Forex brokers for your consideration.

Performing adequate due diligence on the front end on your prospective Forex broker, before making your first trade, can literally save you thousands of dollars and prevent nightmares from ever happening down the road. Finding the right broker for you and your trading needs is your top priority. Invest the time that this task requires, and you will never regret it.

Reference: Tom Cleveland

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