How To Pick The Right Forex Broker
The foreign exchange market is one of the largest financial markets today. With over 6 trillion transactions being conducted in average daily, it comes as no surprise that there are more people every day who want to be a part of this market and benefit from it. Unlike stocks and shares which are typically conducted through the stock exchange of the country you belong to, there is no central exchange where these currency trades happen. It is for this reason that if you want to trade in foreign exchange, you should engage the services of a broker.
With the increasing interest in these markets, we are seeing a substantial number of brokerage services cropping up everywhere. There are umpteen advertisements for such services on the internet, television and print media. It can be extremely overwhelming considering that you will be investing your money and effort into this process. You will need someone you can rely on to give you the right advice and guide you through a process that may be alien to you.
So, what are some of the considerations you should bear in mind before you decide to engage the services of a broker?
- Regulatory Compliances: A wonderful and attractive website does not guarantee that the brokerage firm is registered under the regulatory body of the home country. It is vital that you make sure that they are registered bodies and have all the necessary licenses in place to be a broker. The government agencies that regulate these markets have strict rules for compliance so that, investors and the public are protected from abusive and manipulative practices. Not only is their responsibility to protect but to also foster a healthy and competitive financially sound markets.
- Trading Platform: Investors need to be assured of the quality of services they will get when they sign up with a trading or broking firm. Some of the best software is being employed by brokerage companies to help users navigate through websites. This software makes the portal easy to use and visually appealing. Further, they equip these sites with the best tools that makes understanding and executing deals a breeze. So, before you sign up, ensure you go through the website, look for the services you will get, familiarize yourself with the tools, check for articles published that will help you understand various concepts and so on.
- Customer Services: One of the most critical aspects of any trading relationship is the service. It is very important to understand what services you are entitled to and how effective it is. You can call, chat or email the customer service representatives with a few questions to understand the level of commitment and understanding. A Forex global market is open 24 hours a day and hence accessibility to customer service is crucial.
- Currency pairs: Currency pairs are generally the pairs win which currency is exchanged. While there can be a whole bunch of currencies which can be bought, and sold, there are a few major combinations that get a lot of attention. For instance, the British pound and the US Dollar, the US Dollar and Japanese Yen, the Euro and the US Dollar and so on. While most online trading platforms or brokers will offer an entire range of currency pairs, what is critical is to know if they offer the pairs that you are interested in.
- Accounts: What differentiates one broker firm from another is the advantages or privileges they give for account holders. These will differ based on the kind of clients they get and what they consider important for the clients. Some of these features are
- Once you sign up as a trader, you will have access to a leverage amount and this can be based on several factors. So, if you have deposited 1000$, you can have access to 50,000$, if they are using a 50:1leverage. A good brokerage firm will explain the pros and cons of the same as leverage should be used with caution.
- Deposits and withdrawals are something that should be considered carefully. If you read the terms and conditions carefully you will get a fair idea of how convenient or tricky it may be to do the same.
- Since brokers earn money through commissions or spreads, you should have a thorough understanding of how it will affect each trade that you place with your broker.