Choosing a forex broker that best suits your needs as a trader is not that difficult if you take a few tips in consideration. These tips represent a number of questions you need to answer in order to narrow down your choices before you make that decision to sign up.
Before comparing broker pricing or bonus sign up offers, the first thing you need to find out is whether this broker is registered with any regulating authorities. If the broker is based in the US, make sure it is registered with the National Futures Association (NFA) or Commodity Futures trading Commission (CFTC). For those brokers based in the UK, check if they’re registered with the Financial Service Authority (FSA). If your broker is not registered with any of these regulatory bodies, you might want to think twice before wiring your money, particularly if they’re based on exotic islands. This would be your first step in lowering risk as Forex also has its fair share of scamming.
The next point to verify would be the spreads, what kind of spreads are you looking for? Fixed or variable spreads? How do they compare to other Brokers? Remember, the higher the spread, the more you are paying per transaction as this is how brokers make their money. Regardless of your trading strategy, low spreads ensure you keep a larger cut of your profits.
If you’re new to online Forex trading, beware of leverage. It will knock you out of the game pretty quickly when you’re still learning the ropes. Picking a low level of leverage ensures you will be around for longer and while it keeps your winnings small, your losses will also remain small. Successfully trading with virtual money does not guarantee you will do as well with real money.
Speaking of money, make sure you take the time to take several brokers for a demo ride. On one hand you test their platforms and on the other you practice with virtual money. However, when you decide the time is right to start with real money, start with a small amount. Remember, the currency market isn’t going anywhere and it will always offer opportunities. Starting with a small amount is highly recommended for beginners as you will be in a different state of psychology when real money you worked hard for is involved in the game.
Once you narrow down your list of potential brokers, test their customer service by asking questions. Some brokers like the Alpari forex company offer you premium services such as trading tools, news feeds, market analysis, webinars and tutorials. Most importantly, be prepared to move your money quickly if the live experience does not mirror the demo platform, you might be surprised with reliability issues, slippage or even speed execution.