Forex is a global financial market that operates 24 hours a day. Besides, it generates over $ 5 trillion a day in trading volume. It’s also a market where thousands of investors come to exchange currencies, hoping that these operations will bring them a profit.
But to complete these transactions, they need to go through an intermediary. This intermediary is the forex broker. The broker is an essential part of the chain that enables this global market to function.
You must therefore be sure of the quality of your intermediary before starting. Here are some points to check to select the right broker to fit your needs. Read them carefully to make your trading experience as pleasant and lucrative as possible.
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Make sure the broker is not on the blacklist
Before transferring your money to the account you have opened, you must be sure that it will not vanish into the wild. Therefore, the first step is, to check that the broker disposes of the authorization to operate in the state you perform your trades in.
To do this, you should check if it has a licence in one or more states or if it operates off-shore. The first reflex is to go to the financial market authority website to check it’s not on the blacklist of dishonest brokers.
A licensed broker benefits from the bank guarantee fund. In the event of bankruptcy, these funds assure you that your funds are safe.
Read customer reviews of forex brokers
Testimonials and comments on forex dedicated forums are also a thing to pay attention to. These comments are essential to understand how the broker works and if it respects trading ethics. Brokers with history can be trusted more than newcomers. Moreover, a broker with several satisfied clients on a forum is more reliable than one with the most derogatory comments.
The trading account
The first element to check is the quality of the platform: is it practical and complete? Is it slow, has your demo account crashed? Then you have to check out the fees and the costs.
Brokers with history may offer an immediate opening of the account, followed by a first deposit, through transfers or more or less well-known payment methods.
You should inquire before trading about the conditions of a withdrawal of funds. In certain cases, these withdrawals are accompanied by high costs or unreasonable delays.
It is, therefore, necessary to review financing costs, rollover costs, level of spreads. And don’t forget the fixed flat-rate commissions, such as withdrawal costs, closing costs and even sometimes the costs of ‘inactivity because you should be aware that some Forex brokers “punish” the clients once they notice the absence of transactions within 30-60 days.
Also, pay attention to the trade conditions between a demo account and real account.
Transactions and prices
A forex broker’s pricing conditions are not fixed by decree, but freely according to its commercial objective and competition level. Some may add fixed commissions (or very high minimums) to all transactions, and others may not.
You have to be particularly vigilant because there are many ways to tax the customer: transaction fees, spreads, account management fees etc.
Distrust especially towards brokers who post zero spreads and too high welcome bonuses. Fortunately, Brokers with history generally earn their money from the transaction fees and spread.
But here too, we must be vigilant. The higher the spread, the greater the broker’s remuneration will be. However, some have low spreads which can vary with time. The flexible spreads can seem attractive at first glance, then suddenly deviate if the forex broker has detected increased volatility or a grown interest for a particular currency pair.