Factors to consider when choosing a Broker

Considering which type of a broker to choose is up to you but you need to select a broker that satisfies your needs.

Below are some of the factors to consider while choosing a broker.

1.Reputation of the broker.

Before you register with a broker, you should first check in which country the company is registered. You must choose a reputable broker with a good past reliable platform, quote tight spreads and without any slippages before you deposit your money into your account. Do some research and find out the kind of image other people have about the broker you intend to use. What do they say about the brokerage  firm!

2.Customer service and payouts,

 A good broker should be able to balance his payouts and should have good customer services. Consider a broker  who offers great  customer services on an excellent trading platform. For example offering it in your natives language, email support and live chart support to ensure good communication with their clients. Some  brokers assign personnel managers to ensure continuity in the support clients get.

3.Trading platforms

 The trading platform is the most important. You need to find a good trading platform that is user friendly but also with features that are good and powerful enough to meet all your trading needs. Choose a broker that offers a demo account on his platform for the purpose of back and forward testing and training practices.

For example for Meta-trader 4 (MT4), is a window based platform that provides a wide range of charting, back testing tools, expert advisors that offer algorithmic trading, auto-chartist, 3rd party technical analysis software and multiple trading accounts.

Other platforms like XM.COM offer browser based platforms/ web based platforms that allow you to trade using the browser. This can be used by traders who may not be able to access personal computers during trading hours.

Some brokers also offer social trading, mobile trading to traders who would wish to use their phones to trade. They offer mobile app versions of their trading soft ware. They include iphone OS (ios), androids and windows phones.

This helps you to have a wide range of options on where to carry out your trades from and does not limit you from trading because you don’t have to carry big gadgets every time you want to trade. You can trade using a mobile phone or in a café  as long as you can access internet.

4.Trade execution.

 You should choose a broker  with good execution practices to have your trades filled in time and at the best affordable rates.

Some brokers like the  Dealing Desk act as the direct counter-party and take the other side of your trade. Your gain will be their loss however this may not be the case because their role is to set the bid and ask spread as they match your trade executions with other clients. They offer fixed spreads to their clients and offset the market risks of your trades with those of other clients and their liquidity providers.

The STP/ECN Brokers take orders straight through to the inter-bank market which comprises of financial institutions like hedge funds, banks and mutual funds. The STP brokers take qoutes from the inter-bank markets add a few pips as spread and then take your order to the liquidity providers with the best quotes.

Some will also allow your orders to interact with other orders in the ECN and this allows you to see the best prices offered. Their orders tend to be quick with no delays compared to other brokers because it’s lined up straight to the inter-bank market. It is commonly used by big traders who take high volume trades and has big spreads.

Other brokers like the XM.COM have a strict no-requote policy under their regulations which would protect you from making losses incase the markets go very volatile. A  re-qouting is when you cannot fill your order at a rate on your screen but you are given a new price at which to execute your trade.

You should also consider choosing brokers that offer guaranteed stop losses and take profit points and negative balance protection to avoid losses in case of strong gappings in the market.

5.Associated transaction costs

 The transaction costs in forex trading include spreads, commissions and fees.

Aim at choosing a broker that will offer you good services at affordable prices. An additional cost on each transaction is significant to your account when aggregated. Therefore you should be keen when choosing a broker to be able to minimize your costs and protect your profits.

Spreads vary with different currency pairs due to different volumes and can either be fixed or floating basing on market conditions. Big spreads can easily blow your account due to the small size of your account. As we said earlier, a spread is a compensation for brokers, therefore should decide which kind of spread works for you before choosing a broker.

Some brokers do not charge commissions while others do. There is also an attachment of fees charged by some brokers especially those in less competitive markets. It’s necessary to always be aware of all costs and fees that may be involved whether listed or not to clearly understand your position.

6.Security.

 The broker you choose should have the most secure server and position. You will have to look at the broker’s credentials and verify his legitimacy and associations., whether he is registered with the government regulatory authority or not. This can be easy to do because information is always provided by a number of agencies so you can be able to separate the fake brokers from good ones. These are some of the countries and their regulatory bodies:

  • 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 fur Finanzdienstleistungsaufsicht(bafin)
  • France: autorite`des Marche`s Financiers(AMF)
  • Canada: Autorite`des Marche`s Financiers(AMF)

7.Deposit and withdrawal

 A good broker is the one that allows you to deposit your money and withdraw your earnings without a hustle. You should be able to deposit and withdraw cash without any difficulty.

Many times we have always been assured of very nice things with clear evidence being snapped on our faces but as time goes on things happen to back fire especially things to do with internet business. A lot of scams and fraud goes on with exciting payoffs that seem to be eye catching and if you don’t take caution you end up falling a victim.

You must have seen almost all you need in a broker and you are so excited to make money; Here we go! Free Forex Coach is here to remind you that not all that glitters is gold.

So before you deposit your money with just anyone think more about it. Develop a habit of skepticism and do more due diligence to gather enough information (facts) about the broker you intend to work with to avoid fraudulent brokers and forex scams.

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