Tips to Help You Make the Right Decision for Choosing the Right Forex Broker
One of the most important things to do to ensure that you are successful at foreign exchange trading is to choose the right forex broker. It’s not always easy to choose the right broker, and indeed, you might just get confused with the numerous options available to choose from.
We have put together a number of points to consider so that you can make an informed decision when choosing the right forex broker.
Regulation Ensures Safety
There’s a lot of your money at stake when you enter the forex trading business. It is best to choose a regulated broker who is fully compliant with all the laws that govern this business. In fact, an unregulated broker is most likely to be a scamster, and that too operating on the internet, whose sole purpose is to steal customers’ money.
There are many ways in which a broker can defraud and manipulate a customer to make money unlawfully. If you choose a broker whose operations are not regulated then you’ll encounter many attempts to sell you futures and options that will only result in losses to you. Therefore, the first thing to check is whether the broker has the necessary licenses to operate and also conducts operations with a high degree of integrity.
Each country handles its forex industry differently and has its own regulatory bodies for it. In the United States, for instance, all forex brokers have to be registered with the US Commodity Futures Trading Commission (CFTC). They should also have membership of the National Futures Association (NFA). All you have to do is check the broker’s website to find out if the company has the necessary memberships.
Funds are Safeguarded
If you trade with a regulated broker then you have the confidence of knowing that your assets will be safeguarded to the best extent possible. You’ll be happy to know that brokers have to comply with a “Net Capital Rule” which dictates how much money they have to maintain in liquid form. Therefore, even if the broking firm closes due to any reason, there will be a safety net that protects a part of your assets, ensuring that you don’t lose them entirely.
In addition, regulated brokers are also required to maintain client funds in segregated accounts in order to prevent their misuse. Regulators in the United Kingdom offer government supported insurance policies for regulated brokers so that customers have some recourse in case the broker cheats them.
Brokerage Fees Vary
Forex brokerage fees vary according to the company and also the services offered. If you were to choose a Dealing Desk broker then you would most likely have to pay for spreads only, but if you were to opt for an ECN broker then you’d have to pay commission as well. A Dealing Desk broker doesn’t work with market liquidity providers whereas an ECN broker does. Therefore, the latter will be able to give you direct access to other traders via the internet while also providing you with better spreads. Most people agree that the ECN business model is the most transparent and therefore the most reliable.
Some brokers also offer premium services at an additional cost, which are nevertheless very useful because they help you make more money. There is a wide range of costs for these services, and therefore plenty of opportunities to choose a broker who provides the maximum services to suit your budget. Many forex brokers also have promotional offers to attract new customers. Its best to go through their terms very carefully to find out whether they are actually worth it.
A little homework definitely goes a long way when it comes to choosing a forex broker, so take your time to make the best decision.