The retail Forex market is a developing sector, and new brokers are constantly appearing. The sheer number of brokers offering comparable services might make choosing a Forex broker a challenging undertaking in and of itself.
We'll talk about the actions you should follow before selecting a broker in this section.
You should always check that a bank is regulated, has positive customer reviews, and is generally secure before opening a new bank account. This is the same as picking a broker. Fortunately, there are regulatory organisations all around the world that uphold regulations to ensure that businesses are meeting consumer expectations and according to the law.
The following list of nations includes the relevant regulatory agencies for each:
- United States: National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC)
- United Kingdom: Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)
- Australia: Australian Securities and Investment Commission (ASIC)
- Switzerland: Swiss Federal Banking Commission (SFBC)
- Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
- France: Autorité des Marchés Financiers (AMF)
- Canada: Investment Information Regulatory Organisation of Canada (IIROC)
Always check this step before selecting a broker; if they are not overseen by a regulatory body, they might even be conducting business illegally!
2. Transaction costs
Whether you are profitable or not can depend on your transaction expenses. Over time, many systems are lucrative without commissions and spreads, but as soon as they are included, their profitability decreases.
You pay transaction expenses, such as commission and/or spread, when you enter trades through a broker. A common practise is to look for the lowest commissions and spreads. In this regard, the increased competition has been advantageous; most prices are now fairly competitive and stable. Even ECN systems, which aim to keep spreads as low as possible and require minimal commission, are now being offered by some brokers.
But keep in mind, check to see if the broker is safe before searching for the best prices. Low prices and lax security are nothing if they steal your money.
3. Trading Platform
You typically execute your trades using the platform that your broker offers. Thus, having a user-friendly and simple to use platform is essential. It can be exceedingly challenging to execute trades, locate charts, and determine risk on many MT4 platforms. Why bother when the platform can handle it for you? The majority of Spotware (cTrader) platforms are quite user-friendly and have cutting-edge charting capabilities and even algo writing stations.
Your brokers must always make an effort to complete your deals at the set price or as efficiently as possible. The broker should typically allow instant orders to be executed as soon as you place the deal when the markets are steady and liquid. If they don't, your profit margin may be reduced and you might even be forced into a deal you didn't want to make at that price.
Although it doesn't harm long-term traders as much, poor execution can still have an impact on profitability.
5. Customer Service
The broker is the place to go if you have any issues, such as how to deposit money, how to utilise software, where to discover specific tools, and so on. This is because they are in charge of dealing with all of these problems. As a result, they ought to make themselves reachable when dealing with these difficulties.
What to look for in brokers offering excellent customer service is:
- Fast email replies
- Online Instant Messaging
- Phone numbers
- Lingual speaker
If you're a beginner retail trader trying to break into the Forex market, maybe this was helpful.