5 Tips for Selecting a Forex Broker

01/27/2014 9:00 am EST

Focus: FOREX

If there is one forex shortcut/secret/trick to know, it is that there are no shortcuts/secrets/tricks in forex trading, says Hillel Fuld of DailyForex.com.

Just like in life, forex trading is the perfect example of “No pain, no gain.” If you are the type of person who tries to cut corners or look for the easy way out, you have two choices when it comes to forex trading. You can either stay away completely or set yourself very strict rules that will ensure you do not fall for any of the dirty tricks forex brokers throw your way.

The process of selecting a forex broker is one of the most crucial decisions you will ever make, at least throughout your forex career. This decision, just like the trading itself, must be made in an objective and scientific way. What I mean is that you should not let yourself get tricked by the various promises being made by the broker, set yourself clear cut guidelines as to what you are looking for in your broker, then find the one that matches your needs.

Unfortunately, that is not the way a lot of people do things and more often than not, an ad they saw online attracts them to the broker’s site, and only then do they convince themselves that this broker is right for them.

Just like you would use a forex trading strategy when actually trading forex, make yourself a strategy when choosing a forex broker. The following is a list of some of the many factors you should take into account when choosing your forex broker:

Trading Platform: This belongs first on the list because at the end of the day, the trading platform is where it all goes down. You need to decide before choosing a broker if you prefer an online forex trading platform or a downloaded one. Are you a social person who likes to be part of a community? If so, you might want to consider Currensee. Are you a person who likes a clean and easy to use interface? If so, you might want to consider eToro. Lastly, are you a person who likes to have many features and options when trading? If so, you might want to check out the various brokers who use the Meta Trader 4 platform. Whatever the case may be, make sure to decide what platform is for you and based on that choose your broker, not the other way around.

Customer Support: Everyone likes to be treated well. This is true about your car dealership, it is true about your local supermarket, and it is even more important when it comes to your forex broker. Excellent customer support is not only something that will make your forex trading experience a more pleasant one, it is also something that will directly affect your forex success. Imagine a scenario in which your forex platform is frozen, it is simply not responding to your requests, or any other technical problem. If there is no immediate channel of communication with your broker, that can mean major financial losses on your part. That might be an extreme example, but the bottom line is, you do not want to open a forex trading account with a broker that does not have the highest level of customer support. Verifying this could not be easier. Before opening an account, simply check if the broker has a chat. Do they answer the phone? Do they even have a phone number? How long does it take them to respond to emails? These are some of the questions you need to answer before choosing your broker.

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User Reviews: This is one of the most important types of research you will conduct in your entire forex career. There is no better way to check the quality and reliability of a forex broker than to read the opinions of people who were in your place in the past. Hear what traders are saying, read online reviews about the forex broker. Every broker has pluses and minuses, are this broker’s disadvantages something you are willing to live with? There are many sites online that cover the majority of Forex brokers, the trick is to find the honest and objective ones. A good way to find dishonest and subjective reviewers is when the review has nothing negative to say about the broker.

Trading Features and Specifications: This is of course a very important part of forex trading. What kind of spreads does the broker offer? What pairs do they support? Do they have all the needed trading features included in the platform? Stop losses, Take profits, technical charts, forex news, and simple deposit and withdrawal processes are some things you should look out for. You do not want to open an account with a broker that is not using state of the art technology. If they are not up to date on their trading features, this should raise a red flag for you.

Forex Bonuses and Promotions: It is no coincidence that this is last on the list. It is easy to get blinded by promises of free bonuses, no deposit promotions, and trading freebies. All these are great AFTER you have already narrowed down your forex brokers to a few. If you are having a hard time choosing from three or four top brokers that meet all the above requirements, then there is nothing wrong with going with the one who offers you the best trading conditions.

In conclusion, the entire process of forex trading should be objective. There should be no emotion involved whatsoever. The less emotion you use in trading forex as well as choosing your forex broker, the better off you are and the more likely you are to succeed as a forex trader.

By Hillel Fuld, Contributor, DailyForex.com

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