HOW TO CHOOSE YOUR FOREX BROKER

How to Choose Your Forex Broker

Before you can start investing in Forex, you will need to open a trading account with a Forex Broker.

But what exactly is a Forex Broker?

In simple terms a broker, is the company in charge of executing the orders that you request. Brokers earn money by charging a fee for their services, but Forex does not charge a commission directly, but charges the denominated spread, which is the difference between the purchase price and the selling price of any currency pair.

You may feel overwhelmed by the large number of brokers offering their online services. Deciding which one to use will require a bit of research on your part, to find out more information about services, reliability, requirements, types of accounts, ... Periodically we analyze and test numerous brokers online. We make comparatives and rankings according to the services they offer, we publish their welcome offers for new clients, ... You can find updated information of what we consider the best brokers on this page: Best Brokers

Are all Forex Brokers regulated?

When selecting a Forex broker, you must know if it is regulated and which supervisory agency is in charge of controlling its activity.

Regulators are responsible for protecting investors and ensuring good trading practices on the part of the broker. That a broker is regulated does not automatically make it a reliable company but at least it provides an extra guarantee for the investor and also serves as a mediation body in the event of any possible conflict.

There are many regulatory agencies around the world. Brokers usually exceed the regulation of the regulatory body of the country where the main office is located.

In Europe, we have, for example, bodies such as the United Kingdom's Financial Conduct Authority (FCA), BaFin in Germany, the CNMV in Spain, the CySEC (Cyprus Securities and Exchange Commission) in Cyprus (where Present many brokers and other sports betting companies, online casinos, ... due to its low taxation and to be a member country of the European Union), ...

In Australia is another well-known regulating body as the ASIC (Australian Securities & Investments Commission)

In the United States, brokers must be registered as a FCM (Futures Commission Merchant), with the CFTC (Commodity Futures Trading Commission) and as a member of the NFA. In this case the current status of any registered Forex broker can be verified in the CFTC and the NFA and check their disciplinary history by contacting the NFA directly or by visiting their website www.nfa.futures.org/basicnet/.

Customer Service

Forex is a market open 24 hours, so it is important that your online broker offers you a good support available 24 hours in case you need to resolve any questions or issues. Generally, most brokers have 24 × 5 hours and allow their customers to contact them by phone or e-mail, and in some cases more quickly via Skype or online chat.

The quality of the support can vary from broker to other so you have to thoroughly investigate these details before opening an account.

It is also important that you be offered help in your language. All online brokers usually have customer service available in English and some also in Spanish and other languages. If you do not speak English, it is important that you work with a broker with whom you can communicate in your own language.

Trading Platforms

Most forex brokers will allow you to perform online transactions relatively easily. The broker is the one who will offer you your trading platform for you to perform the trades. There are platforms simpler and others more complex. Therefore, working with the right software is very important and you can decide by testing the demo accounts of some online brokers and thus familiarize yourself with the platform they offer and check if it fits your needs.

Examine the screen layout of your broker's trading platform. This should include:

• The ability to see in real time the prices of currency pairs
• A summary of your account balance, with profit and loss, available margin, and any margin locked in your open positions.

Most of the operations platforms are based on web format (WebTrader) or in downloadable format for the client to install on your computer. The option you choose depends on your personal preferences:

• The Web software is on the website of your broker. You will not have to install any software on your computer, and you can enter this platform from anywhere with a computer that has access to the Internet.
• A software program that you download and install on your computer will only allow you to operate from your own computer, unless you install the software on each computer you are going to use.

Generally the programs that are downloaded and installed are slightly faster, but most are developed for a specific operating system. For example: many brokers only offer their platform to work with Microsoft Windows. If you use Mac, you will not be able to install the application and you will have to use the Web or Java platform of your Forex broker With these two types of platforms you can work from any computer since they work through the Internet.

Do not forget to have a fast internet connection

The Forex market is a fast moving market and you will need second-to-second information to make decisions that allow you to perform your trades. Make sure, then, to have a fast Internet connection, if you do not have it, better not bother to start trading in Forex. If you plan to do online trading, you will need a fast Internet connection.

Real-Time Prices and Analysis Tools

Any worthwhile forex broker will offer you real-time price quotes and allow you to enter and exit the market fast. These are minimum requirements of any trading platform. For older, there are improved software packages usually targeted at professional traders who have an extra cost per month.

Many brokers also offer on their trading platform an extensive catalog of technical analysis tools and integrated charts.

Mini / micro beads

Many brokers offer mini trading accounts (to operate minilotes) and even smaller accounts, micro accounts (microlotes). These small accounts are a great way to get started in Forex for beginners and low capital traders. You can open an account with 100 € / $ or even less, learn and test your skills in currency trading and gain experience.

Broker Policies

• Currency Availability: You must confirm that your Forex broker offers you the possibility to trade at least the 7 most common currency pairs (AUD, CAD, CHF, EUR, GBP, JPY, and USD).
• The lower the number of pips per transaction required by the broker, the greater the trader's profit. By comparing the pip-spread of half a dozen brokers, you will be able to know the different transaction costs. For example, the average spread for EUR / USD is generally less than 3 pips in most brokers, but they exist from just over 0 or 4 as well. These differences can be important depending on the strategy.
• Margin Required: The lower the margin required, the greater the potential for higher profits and losses. Low margins are good when your trades are good, but not so good, when your trades do not go so well. Be realistic about the margins and remember that they work towards both sides (losses and gains).
• Size of the minimum operations required: The size of a lot varies from broker to another, it can be 1,000 (microlote), 10,000 (minolet) and 100,000 units (lot). A lot of 100,000 units is called "standard". A batch of 10,000 units is called "mini", and a batch of 1,000 units is known as "micro". Some brokers even offer split lot sizes, which allow you to create your own unit size.
• Rollover: This cost is determined by the difference between the interest rate of the country of the currency and the interest rates of the other country. The higher the rate of difference between the two currencies of the currency pair, the greater the rollover. For example when operating with GPB / USD, if the British pound has more differential interest with the US dollar, the rollover for the British pound will be more expensive. On the other hand, if the Swiss franc had the least differential interest with the US dollar, the USD / CHF charges would be the least expensive of the currency pair.
• Hours to work. Almost all brokers align their working hours to match the trading hours of the global forex market from Monday to Friday.

Summary

What to look for in a good Forex broker?

• Low spreads: In forex, the spread is the difference between the buying and selling price of any currency pair. Lower spreads will save you money.
• Low requirements to open an account: For those who are new to forex and do not have millions of dollars to risk, being able to open a micro account with only $ 100, $ 250 or $ 500 is a great opportunity. (It is still advisable to start investing in Forex with a reasonable minimum, at least $ 1,000).
• Instant execution of orders: This is one of the most important things when choosing a forex broker. When working with currencies it is important that the price you see on the trading platform is where your order is executed, and for this it requires the instant execution of each order.
• Free technical analysis charts and tools: Choose a broker that gives you access to technical analysis tools and available charts with real-time quotes that allow you to properly take your trading decisions.
• Leverage: Leverage can make you a very rich or very poor person. As a novice or inexperienced trader, you should not work with a lot of leverage. A good rule of thumb is to not use leverage greater than 1: 100 for standard accounts and 1: 200 for mini accounts.

Remember that you can consult detailed and updated information about what we consider the best online brokers in this section: Best Brokers.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.