Wondering how forex works? Curious about the forex market but don’t know where to start? If you’re just testing the waters in the forex market , having a broker from the very beginning is a great advantage.
In fact, choosing the right forex broker could indeed be the most important trade you could undertake because all the trade decisions that follow will be influenced by this one choice. When you trust a broker, i.e. a company or an institute with your money, you expect them to be responsible with it while trading so that you can earn profits. However, as you may already b e aware, the forex market comes with its own set of risks that must be calculated. Therefore it is of utmost importance to find a broker who understands your requirements and offers the right tools and guidance to help you get ahead in the trade.
Here’s Why Choosing the Right Broker Matters
You’re able to trade forex online through a broker. They are the ones who keep your funds safe in your account. Mind you the value of your funds can change overnight as a result of the price changes that happen in the market. Therefore, they could be charging you handling fees that could cover commissions, financial advice and withdrawal requests. However, the handling fees must always be transparent. Be sure that you are able to read through the fine print and are fully aware of the terms and conditions that could be wrapped up in legal jargon.
Transparency and proper regulation are non-negotiable when looking for a trustworthy broker. When you’re able to decipher your broker’s financial standing, you’re also in a position to perceive how they will possibly react to the ups and downs in the forex market.
Tips for Finding a Great Forex Broker
- What Do You Need?
You will be able to find a broker who is the right match for you only if you are fully aware of your own requirements. What kind of trading do you want to practice? Would you be taking day trading slowly or do you want to trade high volumes?
It is wise to look for an ECN broker if you want to trade more but capture small moves. When you’re trading small moves, the spreads are tight and so be prepared to pay a commission on every trade you undertake. Know how much capital you need to trade the right lots. If your capital is less than $5,000, opt for micro-lots but if it’s more, mini-lots would suit you better. Before diving into standard lots, make sure you have sufficient capital. Your account should have a minimum of $50,000 to start day trading standard lots. Deposit and withdrawal of funds are also done differently by different brokers. Identify and pick the broker that suits your needs.
- Account Features
While account offerings almost always vary from one forex broker to another, make sure you take these four points into consideration when choosing a broker:
Leverage and Margin
Commissions and Spread
Initial Deposit Requirements
Ease of Deposits and Withdrawals
Leverage and Margin
Forex brokers allow their customers, i.e. forex traders to borrow funds in order to expand their trade. This is known as leverage. The amount of leverage a trader can access depends on what the broker offers on the basis of the trader’s margin account. For example, suppose a trader has an account size of $1,000. With a 20:1 leverage, the trader can choose a position whose value is $20,000. Certain brokers offer high leverage that can go as much as 200:1. Of course, greater leverage means greater profits when you’re in the right position, but you must proceed cautiously. When the position is not favorable, you can also face the risk of having huge losses.
Commissions and Spreads
When you look around for a broker, learn how the one you’ve picked makes money. Some brokers may charge commissions per trade while others may simply do so with bigger spreads. Find out if your broker is charging a particular percentage of spread as commission. This is actually the difference between the price of purchase and the ask
One of the reasons why the forex market is so lucrative to new investors is that you can earn more by investing less. In most cases, you require a minimum initial deposit which can be as little as $50 to get started. When you add leverage to this figure, the purchasing power of a trader can be much higher.
2.Ease of Deposits and Withdrawals
Account funding and withdrawal policies can vary from broker to broker. Your broker may allow you to fund your account through online transactions such as credit/debit cards, UPI, PayPal, or even bank cheque. Usually, withdrawals are done through cheque or wire transfers and your broker may charge you a fee for these services.
- Currency Pairs Offered
There are 28 currency pairs and 8 major currencies in the forex market. Even though there are many other currencies other than these, it is only the major currencies that attract most of the trade and thus have far greater liquidity. Make sure your broker offers you a variety of currency pairs to choose from.
When choosing and researching brokers, it may be a good idea to read online reviews. Find out what their customers say about them but do not get carried away by fake reviews. Whatever anecdotes you base your decision on, must come from a credible, well-informed source.
- The Platform
It is very important to have a comprehensive, easy-to-use trading platform. The platforms are your gateways to the market as a forex broker. It should be updated with the latest tools, features, educational resources, and technical indicators and also offer a demo account for practice. It’s imperative to have clear, visible, lag-free entry and exit buttons.
The trading platform is the investor’s portal to the markets. As such, traders should make sure a broker’s platform and the software come with the technical and fundamental analysis tools they need, and that trades can be entered and exited with ease.