For investors who consider Forex trading as a way to supplement their investment portfolio and returns, finding a reliable and trustworthy platform is one of those problematic aspects. But working with a broker can be an extremely rational decision. Like all investments, Forex trading has some inherent risks and so does finding a good broker to help you in your trading. The guidelines below will make the selection process a little easier for inexperienced traders.
Why collaborating with a broker is a rational decision
A Forex broker is an agency helping traders access a professional FX trading platform and enabling them to sell foreign currencies. In this case, reliable brokers are necessary because they help traders have non-stop access to the market and trade currencies in a secure and regulated context.
Although similar collaborations ensure higher returns for traders, the selection process should be carried with the broker’s reputation in mind. These agencies are usually compensated with a small percentage of the currency pair, the bid-asked spread.
Reputable brokers usually offer demo accounts for all interested traders before asking them to settle. Ideally, prospective clients should test as many brokers and platforms before choosing one. This step will offer a better understanding of the system and trading process in each broker’s case.
During their demo period, traders should test and see if the platform and broker are able to meet their trading needs.
Search for regulated brokers
A regulated Forex broker will play a crucial role in settling any potential trading disputes. Regulatory compliance will establish how reliable and trustworthy a broker is. Depending on where you are located geographically, you will want to look into brokers authorized by different regulatory bodies.
For instance, in the UK, you should search for brokers authorized by the Financial Conduct Authority (FCA). EU brokers should get their authorizations from the European Securities and Markets Authority.
US trustworthy brokers are regulated by the National Futures Association (NFA). The Australian Securities and Investments Commission regulates Australian brokers, and so on.
When traders collaborate with unregulated brokers, scenarios like an overnight shutdown of an agency and being unable to withdraw their earnings are very likely to appear. Liability concerns may also appear when dealing with unregulated agencies.
Apart from offering a secure trading environment, brokers also give their clients spreads and commissions. The lower the spreads and commissions are, the higher the return for the trader. Tight spread Forex brokers or low-spread Forex brokers are the ones investors should look into. These are more advantageous for their trading experience and monetary outcomes.
When brokerage agencies pride themselves on low commissions, users should beware of higher/wider spreads. This is a common compensation strategy in unreliable brokers’ case.
Look for significant account details
Forex investors should also look into the variety of account offerings of brokerage agencies .
Paying attention to account leverage and margin will ensure higher returns for traders. Retail accounts, for instance, have a 1:30 leverage, while professional accounts have 1:500 leverage rates. The leverage acts like a loan extended to margin users by brokers.
A good example of how it works is the following. An investor with $1,000 in their trading account will end up having $50,000, by applying a 50:1 leverage on their account.
Such account details work in investors’ advantage by supplementing their income and offering them a winning position. This account detail also has the potential of severely damaging a trader’s profits because it also has an inherent loss potential. So, leverage is not the only variable that should be factored in when searching for good brokers.
Reliable and helpful customer service
Given the fact that Forex trading can take place 24/7, it’s important to find a broker with a similar customer support regimen. Reliable and helpful customer support representatives are a tell-tale sign of reliable brokers. They should be easy to get in touch with and speak to. Before settling for a brokerage agency, traders should try to get in touch with a customer support representative.
Ideally, they shouldn’t be auto-attendants. These can make the whole process frustrating and the needed information will be difficult to get. An actual person still performs better at customer support-related tasks than robots.
Investors should ask about spreads and regulation, the available leverage on different accounts and different details about the company when first getting in touch with these representatives.
The platform itself
Investors should always choose a broker with a trading platform they are comfortable with using and interacting with. Also, they should choose brokers who fit their individual trading needs. Different brokerage agencies offer different tools and plugins that contribute to the overall trading experience.
An intuitive and user-friendly interface will also contribute to a smooth and easy trading experience, so traders are advised to test different functions during the demo period.
Privacy and security concerns
Choosing a broker should be a decision made with privacy and security in mind. Traders who are tempted to collaborate with unregulated brokers should beware of how the broker is protecting customer data and how secure the platform and tools are. When traders register with a broker or another, they should ensure that their data won’t be shared with any third-parties and that the data is not specifically be made publicly available.
A reliable trading platform will always be https secured and all available tools on the platform should have different steps of user identification and identity checks.
Reliable brokerage agencies will always offer beginner traders a series of resources and tools to use to get a better grasp of how Forex trading and the system itself works. Reputable Forex brokers also offer training sessions for beginners. This is an essential step in acquiring the necessary terminology and knowledge in this type of investment.
Disclaimer: This content does not necessarily represent the views of IWB.