Although there are many forex brokers out there, not all are trustworthy and reliable. Most of them don’t even deserve to be called a broker, and you should always avoid dealing with them. It is vital to make some efforts in choosing the right broker and not merely choose based on their marketing and advertising. Why is it so important to deal with the right broker? The significance lies in the fact that only a regulated and reputed forex broker will provide you with an impeccable and profitable trading experience. Some key factors that you must consider in order to make the best broker choice are discussed below:
Always Remember Not All Brokers Are Regulated
You would be amazed to know the number of forex brokers that are actually unregulated. The problem with an unregulated broker is that dealing with them might lead to unpleasant problems, especially if you are a beginner. Thus, be very much cautious and select a broker who adheres to certain laws and guidelines.
Most Forex Brokers Tend To Make A Profit At Your Expense
As you know, brokers make a profit by charging spreads, which is the difference between the bid and ask prices. However, you will see that many brokers charge higher spreads, which will eventually mean little profit for you. Thus, always choose reliable forex brokers with narrow spreads so that you can have more profits for yourself in the end.
High Leverage Increases Your Losses
The application of leverage allows traders to invest a large sum of money with a little capital of their own. Thus, leverage has the potential to enhance your purchasing power considerably. In forex trading, leverage is always represented in ratios, such as 1:100, 1:200, 1:500 and so on. Thus, if you are using a leverage of 1:1000, it implies that you can make an investment worth $1,000,000 with a deposit of $1000.
Therefore, leverage is a highly effective option for small traders who don’t have much to invest. They can use leverage to maximize their profits. However, one thing worth mentioning here is that leverage should always be handled carefully. The reason is while it has the potential to maximize your profits, it can also magnify your losses by the same magnitude.
Reliable Trading Platforms
A reputable forex broker is the one who offers the best trading platforms. A reliable trading platform is a must to ensure instant access to technical and fundamental analysis, automated trading, unique features, and a superb security system. Furthermore, the trading platform should also be user-friendly. One of the greatest benchmarks you will see in the market is the MT4 trading platform which is generally offered by all reliable brokers today.
The forex market moves at a very fast pace; thus, you must choose a forex broker who can execute your orders quickly. Delays in order execution are a significant red flag as they can adversely affect your trading outcomes.
The Variety Of Accounts Available
All traders are different; thus, if you find a broker that offers an account type which matches your needs, you should go for them without giving it a second thought. This point is particularly important for small traders with little capital; for them, if a broker is offering an account with a minimum deposit requirement of less than $5, it’s the best option. The best broker will also have a wide range of accounts available as they know traders don’t like restrictions of any type.
Trading with a demo account is considered to be the most effective way to sharpen your skills, test numerous trading strategies and speed up the trading process. A demo account provides you with the opportunity to trade in a real trading environment without investing real funds. Hence, the funds utilized for trading in a demo account are virtual.
A Variety Of Trading Instruments
As mentioned before, no trader likes any sort of restrictions. This is also true for trading instruments. The more diversified range of financial instruments a broker offers, the more reliable you can consider them. Furthermore, you must choose a broker that offers all the major, minor and exotic currency pairs.
Deposits And Withdrawals
If you are able to deposit money quickly, you will be able to maintain your positions efficiently and take advantage of trading opportunities that have come up suddenly in the forex market. Similarly, if you need to withdraw your funds, make sure the withdrawal process is easy and quick, which should not take more than a few business days.