FxBrokerReviews.org – If you are new to the market or looking for a forex broker to start trading then you are at the right place. Choosing an ideal broker for your trades can be an intimidating task. Once you start looking for the best brokers of forex you will be bombarded with an overwhelming number of internet advertisements and suggestions to register with a broker.
There are a variety of brokers in the market today looking to trade with you and it is quite common to get confused when so many options are provided. While selecting a broker there are several factors that you should keep in mind. Firstly, you check whether or not the broker is regulated. Factors like asset selection, low spreads, educational resources, trading platforms, and tools also make notable differences while selecting a broker.
Choosing a broker with little experience can take a lot of time and research. In this article, we look at what are forex brokers, how to choose best forex broker, and the factors to consider before you invest your money.
Also read: What is Forex Market?
What is a forex broker?
Forex broker is a very common term, in the trading market. Even before starting trading, you might have come across this term quite often. But who is a forex broker?
To carry out trades in the forex or foreign exchange market, you require a broker. If we go by the forex broker definition then: A broker is the one who provides access to buy and sell currencies and assets like commodities, stocks, CFDs, and more. For providing these services most brokers charge spreads. Spreads are the difference between the bid(buy) price and the ask(sell) price. Some forex brokers also charge a minimum amount of commission for trading certain assets like CFDs.
Read below to: understand how to set up a forex trading account
How to choose best forex broker?
Choosing a good forex broker allows traders to devote all their time to making trading strategies and getting successful returns. Forex for beginners can be very simple if traders can find a perfect broker.
Find below how you can find an ideal forex broker for all your trading needs:
1. Regulation and License
The first thing you should look for while selecting a broker is regulation. Forex brokers without any regulation are often termed as scams. Since the forex market is decentralized and has no regulating body your broker must be regulated under some authority.
Organizations like the FCA, CySEC, The federal reserve board and more look after all the brokers and ensure that all traders are being carried out in a fair manner. Here, it is also important to check the license number of the brokers.
Often certain brokers to lure traders falsely mention about being regulated. The only way to check this is to look for the registration number or the license number of the broker. To know more about how to check regulated forex broker visit here.
2. Fees, commissions and spreads
A forex broker usually uses spreads to charge for the services they provide. But apart from the spreads there are various other fees that a broker may charge. Let us look at all the charges incurred by a broker one by one:
- Deposit fees
The deposit fee is the minimum fee required to start trading. To open an account with a forex broker traders are required to deposit a minimum fees. Some brokers have a fixed amount that needs to be deposited, while others give an option to open an account with a minimum amount. The deposit fee may vary on the type of account: Mini, Standard, or Premium.
- Withdrawal fees
It refer to the fee charged by the bank or your broker for withdrawing the funds from your forex account. The withdrawal fees depend on your broker and the type of asset you are trading.
- Inactivity fees
An inactivity fee is a sum charged to investors who haven’t engaged in any buying or selling activities in their forex accounts for an amount of time specified by the brokerage. Again this fee depends from broker to broker.
Commission is another way for brokers to charge traders for the services they provide. There are usually three forms of commission. Some brokers offer a fixed spread, others a variable spread, and a commission based on a percentage of the spread.
3. Assets offered
A strong broker should provide a variety of financial instruments to trade from. Even if the broker just specializes in any one type of asset, they should have other options available. Having asset options gives trades a chance to diversify their portfolios and improve their trading strategies.
Forex for beginners will usually include trading of currency pairs, but if you want to start trading in any other asset the platform should have options. Most forex brokers allow traders to trade in forex currency pairs, stocks, CFDs, EFTs, and commodities and some even offer cryptocurrency. Check out the list of the best brokers of forex in the UK on forex broker reviews.
4. Availability of trading platforms
Third-party software like MT4, MT5, and Webtrader have become very popular due to their advanced chartings and technical analysis tools. These platforms have hugely contributed to making the trade process easy.
Forex brokers that provide access to trading platforms like MT4 and MT5 are very reliable and provide additional tools. Traders should make sure that the platform comes with the fundamental tools and features they require.
Another factor to take into consideration is that the platform should be well-designed and should have a smooth user- interface. A poorly designed platform can sometimes be the cause of losses and costly order entry mistakes.
Also read: 10 Best MT5 Forex Broker in 2022
5. Leverage and Margin
Leverage and margin are the two most crucial terms in trading. Before you start trading it is extremely important to understand these terms.
- Margin: Margin is a portion of your funds that is set aside by the forex broker from your account balance. It is done to keep your trade open and also ensures that any potential loss of the trade can be covered up. The margin is used for the duration of the specific trade.
- Leverage: Leverage means borrowing some money from the broker to invest in any asset. While leverage seems attractive it comes with a high amount of risk. Leverage extends an investor’s exposure to a market as it allows an investor to purchase more than they can afford. Even a slight unfavorable change in the prices can incur huge losses.
Therefore, before investing with any forex broker you should check the amount of access to leverage made available in your margin account.
6. Speed of Execution
Execution speed refers to the time taken by the forex broker to carry out the trade in the financial market. Execution speed is important as it helps to provide accurate pricing in the market, which is ever-changing.
However, a good execution speed is essential for traders who use scalping strategies or Expert Advisors (automated trading or trading robots). These strategies are known to process several transactions in a short time and therefore a constant speed of execution is required.
A slow speed of execution can lead to delayed trades and can cost money or incur losses. If you are using forex for a beginner level and using a demo account then keep in mind that all demo accounts do not show an accurate representation of the execution speed of the live trading environment.
7. Risk Management provisions
While potential market risks are unavoidable to certain extents due to the volatility of the market. forex brokers can often help traders to minimize risks in the market. Most brokers have the option of opening a virtual portfolio i.e. a demo account. A demo account allows traders to buy or sell financial instruments without having to put in real money. This helps them to learn trading styles and strategies that give the insight to prevent losses and risks.
8. Educational Resources
If you look at a guide on how to be a good forex broker, you will find that having quality educational resources play a crucial role. Looking at the nature of the market, it is hard to always keep a check on the prices. Therefore, forex brokers that provide tutorials, guides, news alerts, and other information about the forex market are considered to be the best brokers of forex.
9. Customer service
Customer service plays a significant role in choosing the right broker. A good forex broker will provide 24X7 or 24X5 assistance either on call, by text, or by mail. Certain brokers even provide you with a personal account manager who can advise you on several trade decisions.
How to set up a forex trading account?
Setting up a trading account is a very simple process. All you have to do is provide your details, get your documents verified and submit a minimum deposit to start trading unless you are using a demo account. Follow the steps below to open your first forex trading account:
1. First you need to provide your basic details like
- Email and phone number
- Account currency type
- Date of birth
- Tax ID
2. Review the different accounts available to open and make a decision on how much you are willing to invest.
3. After this, agree to the terms and start your application form.
4. Submit your documents for verification, once verified you will be able to access the forex trading platform.
5. Select a username and password for your forex account and log in.
6. Once you have successfully logged in, submit the minimum deposit account if you are not using the demo account.
7. Start trading.
Also read: How do I Trade Forex?
How to check a regulated forex broker?
Forex broker definition says that all forex brokers have to be regulated to offer trade services. But forex scams have become so prominent that it is difficult to check whether or not a broker is regulated. We advise you to consider the following points before you choose a broker:
|Regulated forex broker
|Fraud forex broker
|Has trading platforms like MT4 and MT5 available.
|Usually does not provide access to any third-party trading software.
|Has an authentic license and registration number, issued by the regulatory authority.
|Will not be able to provide either a license number or registration proof by any leading authority.
|A regulated broker will never call new traders, asking them to invest in the platform.
|Can call users asking them to join the brokers and even ask for instant payment.
|Will never make unrealistic promises about high returns.
|Makes promises of high returns and does not disclose market risks.
|Gives full disclosure of commissions, fees, and spreads.
|No information is provided and often charges some hidden fees.
How to be a good forex broker: for beginners?
Here is a quick checklist for all beginners looking for the ideal forex broker:
Here’s a quick checklist to make sure the broker being researched has plenty of features that someone new to trading will benefit from
- The broker should provide a free demo account.
- The forex broker should be regulated and provide all information about the fees charged.
- The trading platform should have a wide range of assets to choose from.
- Should have free tutorials and educational content to help traders build and develop trading knowledge.
- The trading platform should be user-friendly and easy to navigate.
- The broker must have reliable customer service that supports multiple languages used by all kinds of traders.
- Ease of access so that traders can manage their deposits and withdrawals.
- A range of trading tools, such as copy trading, and other indicators to help with market analysis along with access to trading platforms like MT4.
The forex industry is growing day by day and so is the number of forex brokers. Choosing a forex broker is indeed an important decision, but also time-consuming. We understand that questions like how to check a regulated forex broker or which is the best forex broker can be quite overwhelming, especially for new traders.
Although if you read reviews and go through all the steps mentioned above you will be able to find a reliable broker without much effort.