What to look for when searching for the best broker?

14 April,2021 01:30 PM IST |  Mumbai  |  BrandMedia

The forex broker you select is the most important trade you`ll ever make. You`re entrusting all of your trading capital to that firm, with the understanding that you`ll be able to trade with it and withdraw your profits when the time comes.

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You may have excellent forex plans, but if your broker embezzles your funds, all of your hard work and analysis will be worthless.

Therefore, in this guide, we are going to tell you about what factors you need to consider before selecting your forex broker.

So, let's get started!

1. Ask yourself

First things first, before looking at brokers, assess your own needs.

Ask yourself, "Am I going to trade a lot or a little"?

Consider using an ECN broker if you trade often and want to profit on slight price movements. You will be charged a fee on trades, but the spreads are much tighter, which is important when trading small movements.

If you don't think you'll need an ECN broker, then you still have a big pool of potential brokers left. You can look for STP (Straight-through processing) brokers. They work similar to ECN but allows fewer spreads.

How much capital do you have?

You must trade micro-lots with a limited amount of capital. You will start trading mini lots if you have more than $5,000. If you don't have at least $50,000, don't open a regular lot account.

2. Check broker's credibility

A reliable broker must have a high level of security. Fortunately, determining a forex broker's reputation is not difficult.

There are regulatory bodies that distinguish the trustworthy from the dishonest, such as ASIC (Australian Securities and Investment Commission), FCA (Financial Conduct Authority) in the UK, NFA (National Futures Association) in the U.S, and others.

You can check the FX-List site to find a list of the most credible forex brokers.

3. Transaction Costs

Any time you enter a trade, you must pay for either the spread or a fee, so it is only sensible to seek out the most reliable and cheapest rates.

Check to see if you want tight spreads for your style of trading, and then consider your options. It all comes down to striking the right balance between security and low transaction costs.

4. Trading platform

The majority of forex trading activity takes place on the trading platform of the broker. This means that your broker's trading platform must be user-friendly and secure.

When looking for a broker, make sure to look at the trading platform.

5. Trade execution

Some forex brokers are considered to have a high level of leverage, which tends to be appealing to traders who use aggressive trading strategies.

High leverage can result in large profits, but it is also increasingly risky. Traders who prefer a more conservative approach should look for brokers with moderate leverage.

Before beginning to trade on a real money account, it is important for a trader to determine these peculiarities.

6. Avoid promos

Finally, when opening a live account, avoid any and all promos offered by the forex broker. For instance, "Open a $1,000 account and receive $100 in bonus cash!"

Nothing in life is truly free. Accepting a bonus may cause withdrawals to be delayed because the broker now owns some of the money in your account.

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