A forex broker buys and sells different currencies on behalf of clients  while charging a fixed commission for their service.

However, a forex broker works as a middleman between the trader and the market. For the trading of foreign currency, you use a currency trading broker, to place your trades. For this purpose, you have to open an account, deposit funds, then use the broker’s trading platform to buy and sell currency by using margin. To begin trading in the foreign exchange market, you need to first find the best and reliable Forex broker. A broker is a company that gives traders access to a trading platform that enables them to buy and sell foreign currencies.

A lot of forex strategies commonly use multiple banks for the pricing, and they’ll provide you the best one available.

In forex trading, all the buyers and the sellers can be thousands of miles apart from each other. So, this is where the forex broker comes in. In short, to find the best buyer or a seller of currencies, you can go to a forex broker and they match you up with either a respective seller or a respective buyer.

The forex market is a worldwide and 24/7 market. Moreover, the clients of a forex broker include the retail currency traders who use these forex platforms for supposition on the direction of the currencies. The main purpose of forex trading is to make a profit by exchanging one currency for another at a fixed price. The best forex brokers provide the trading services and also facilities to both retail and institutional clients always.

We aim to provide you complete information that you need to know to choose the perfect forex broker for you if you are a beginner or even an experienced trader in the forex market.

Your priority should be ensuring the safety of your funds, making sure that the broker you choose for trading will not theft your deposit. In that case, you can best take care of this by making sure that you only use a broker based in and regulated by a financial authority in the respected financial center. However, you also need to make sure that even if the broker works honestly, but goes bankrupt for some reason, that you will be able to recover your deposit.

Forex trading is not a get rich quick technique. The only way to be successful in the forex market is to develop patience and consistency. It is beneficial for you to be able to invest in many financial markets at the same time. The right choice is to work with a broker that offers you a vast variety of markets to trade on. As forex trading involves the exchange of a lot of currency in a very short period. To trade on the foreign exchange market, you have to access the currency pairs; so the brokers do that by giving you the full access to the major currency pairs that include:

  • EUR & USD
  • GBP & USD
  • USD & JPY
  • USD & CH

How to choose a Forex Broker?

Here are 12 factors we consider as important when choosing a forex broker.

1. Margin and Leverage:

All the Forex traders have full access to different leverage caps depending on their authority and the brokers they trade with leverage is a credit that is extended to you by your broker. It enables you to trade significant amounts with a relatively small investment. Moreover, it has the potential to significantly increase your profits from small investments but it can also cause your losses. You should carefully choose a broker whose leverage caps correspond to the trading volume you intend to invest in. The leverage that you take must also coincide with all your risk tolerance. Furthermore, all professional traders commonly choose brokers with higher caps on maximum leverage. While the retails customers are recommended to maintain the lower levels of the leverage.

2. Safety of your funds:

To choose a forex broker, your priority should be the safety of your funds than any of the other considerations whenever you open a forex account because brokers can easily abscond or go bankrupt. However, a forex broker with emphasis on safety of funds should easily allow you to recover your account balance through legal action. Before giving your money to your broker, you also must review its funding and withdrawal methods. Sometimes it requires long waiting times to trade when you fund through the checks or wire transfers. Moreover, account closure can be stressful for the trader when a broker compels you to fill out long forms, take surveys, or even speak with a representative trying to change your mind.

3. Manipulation by brokers:

Usually, a retail trader places the orders with the hope that the Forex broker offers a competitive bid or asks a quote for you. While a scam broker could often extend the spread and even create artificial spikes for the trader so that trader can lose capital quickly. In that case, for a trader, who fully depends on the broker’s price feed, this would look like price tampering done by the big players in the forex broker manipulation market. This type of manipulation is commonly seen in the currency market.

Furthermore, it’s quite easy for a retail broker to change the price feed provided to the clients. With the manipulation of the price feed, a scam Forex broker can also resort to stop hunting. For this purpose, a scam broker will tune its software to create the particular spikes near major support and resistance to the levels irrespective of what is happening in the actual market. The manipulation which is done by your brokers can be avoided by doing enough background checks before opening a trading account. Suspicious brokers usually spoil in such price manipulation to split away innocent traders.     

4. Fees and Commissions:

Sometimes the amount of fees and forex broker commission declared by your forex broker is crucial for choosing which forex company is best to trade with. All the brokers get suitable profit from the spreads built into the bid, or by charging commissions on your trades. But some firms have no fixed commission but compensate for their absence by using a higher spread. Spreads are commonly fixed or float based on the exchange market volatility. Commonly specific fees are paid to the brokers for the exchange operations, data provisions, and the regulation. To get a solution, a trader has to calculate all the expected fees and then correlate them with the trading model that is to be applied.

5. Re-quotes:

Re-quoting is another trick made by market brokers. When the price is going up quickly in the market, and you choose the correct direction to enter, at that time your broker can delay for few seconds, and then instead of taking the exact position for you, gives a new price which is much higher than the price you want to enter. But the selection ofthe right direction is required here

When the price is going up strongly and efficiently and you buy, then you will make much more profit, and this is what a forex broker doesn’t want for you. Re-quoting happens when you clicked on the specific buy button, wait for few minutes for the price to go higher, and then the broker offers you a new price. Then you will have to click on the buy button on your screen again to enter. It is possible that they re-quote again, andrepeat this process a few times, to either stop you from entering the market or make youenter with a much higher price. If you find out and complain about it, then they will say that they don’t have an idea, and the re-quoting is just the outcome of the market volatility, and even they have no control over it.

6. Swap

Swap is the interest that you have to pay when you hold your position overnight in the market. It has to be calculated with the help of a special formula, and as each currency interest rate is clearly stated through the related central bank, the swap has to be a fixed amount with all of the brokers, banks, and liquidity providers. However, it is a fact that the swap that you pay is different from broker to broker. There is no problem if it is not too much, but in case if you see your broker charges much more for the swaps, then you have to ask them about the reason, and you also have to close your account if they don’t fix it quickly. Swap can affect the balance of your account especially when you hold your positions for a long time.

 7. Customer Services

In Forex exchange market, trading occurs at 24 hours a day, so a best forex broker’s customer support must be available at any point of time. While, another consideration is the ease with which one person can speak live, rather than a time consuming auto reply. When you are considering a broker, just a quick call can give you the complete idea of the type of customer service that they provide, wait times, and the representative’s ability to concisely answer the questions regarding the spreads, leverage, regulations, and company details.

8. Trading Platform

The trading platform is considered the investor’s portal to the forex market. A forex trader must make sure that the platform and any other software is easy to use, visually pleasing, and also has a vast variety of technical or fundamental analysis tools, and that trades can be easily entered and exited with ease. Moreover, a well-arranged trading platform will have clear ‘buy’ and ‘sell’ options, and some even have a “panic” button that closes all your opened positions. On the other hand, a poorly designed interface could lead to costly entry/exit mistakes, such as accidentally adding to a specific position rather than closing it, or even going short when you want to go long. 

9. Leverage

Leverage is a very important facility that can help traders to trade large amounts of money with a smaller account and make much more profits. This is the most common way through which a broker can cheat you. However, it is also a two-edged sword that can easily cut your own throat, if it is not used properly. Commonly the novice and inexperienced traders misuse leverage and take many positions that their account balance is not high enough to handle. So, when this position goes against them, they get a margin call and stopped out very easily and the whole account will be wiped out quickly.

10Bonuses and the Promotions:

Bonuses and promotions are key factors in determining the trader’s choice of the best forex broker. Nowadays brokerage firms are considered more famous and attractive which not only offers you good trading conditions but also has extra incentives for you. Commonly, particular promotional packages are arranged for all the traders’ types and the levels along with their investment amount, frequency of trading, knowledge of aspects of forex trading, and many more.  

 11Regulation and the Licenses:

There are many brokerage regulations in a lot of ways throughout the world; however, the official registration with the financial authorities or any specific country can be very particular. A foreign exchange trader or investor must choose a brokerage company whose business activity is under full control of a relevant regulatory agency. A lot of brokers choose to get registered in offshore jurisdictions, whereas other forex companies choose to stay in onshore according to their needs. Commonly, offshore statutory provisions are considered more liberal and much easier to comply with. It is required that the trader has a clear understanding of the regulatory status of the brokerage company or the dealing desk. Regulatory status is a compulsory part of any business entity providing the forex services and by this, any potential trader can form his opinion about the reliability of the forex broker.  

12. Complete Regulatory Compliance:

Choosing a forex broker regulatory compliance is one of the most important things that you need to take a look at. Regulators always work in the best interest of their traders. They also fully protect them from fraudulent companies and ensure a fair market environment for all the participants.

FAQs:

What are the most common payment methods that the good Forex brokers use?

Good forex brokers ensure the full safety of the customers’ funds. Moreover, they work only with some reliable banking solutions. However, bank wires and online trading are also broadly supported. So, you need to consider what volume you intend to trade before you choose a technique. Some techniques have very low limits on the payments and are, therefore, unsuitable for the professionals who trade larger volumes.

Do all the Forex brokers offer you negative balance protection?

No, not all Forex Brokers offer you negative balance protection. If you are interested to trade on margin with the leverage, then you need to choose a company with a negative balance protection policy. This will simply prevent you from losing more than your available balance.

The Bottom Line:

If you want to choose the best forex broker then you are in the right place. These 12 considerations described above are what you need to know to choose the best broker, including margin and leverage, safety of your funds, manipulation by brokers, fees and commissions, etc. If you have confidence in your foreign exchange broker, then you will be able to devote much more time and attention to developing forex strategies for trading. A little research before committing to a broker goes a long way and can enhance an investor’s odds of success in the competitive forex market. Once, your rough shaping is done, then you can easily finalize your choice of a broker.

Click here for your daily digest of FX news in Asia.  

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