Over the last few years, online forex trading has become very popular as it is considered as a type of investment. This is because you have to be lucky in order to make money using some of the other online methods. Actually, forex trading gives you an opportunity to be a part of the global market trade currencies of many countries from anywhere in the world for 24 hours in a day.
If you are looking to invest in currency trading in Canada, the best option is to choose an IIROC regulated broker. IIROC expands to Investment Industry Regulatory Organization of Canada and this agency is responsible for regulating the financial markets in the country. Though financial regulation is done at the provincial level as well, the IIROC federal regulations take precedence over provincial bodies as far as the forex market is concerned.
The IIROC is responsible for the following:
- Writing rules and setting high operation standards for the investment sector
- Screening of investment advisors appointed by IIROC-regulated firms.
- Setting minimum capital adequacy requirements and conducting financial compliance reviews
- Reviewing to ensure that member firms have procedures in place for handling of clients’ accounts and catering to the needs of individual clients
- Reviewing to make sure that member firms complying with regulations
- Investigating misconduct of member firms and enforcing disciplinary proceedings such as penalties, fines, permanent bans, suspensions, and termination of membership
Canadian Forex brokers providing forex trading services to the country’s residents must have IIROC registration. Only IIROC-regulated forex brokers are considered as Canadian Forex brokers. The margin requirement limit specified by the regulatory agency is 18:1, which is much lower than offered by the forex brokers in the USA.
Further, all those that want to work with Canadian forex brokers in sales have to be certified. They should also be qualified futures traders. In addition, portfolio managers of Canadian forex brokers should be appropriately qualified. This means that just about anyone cannot to set up broking firms and manage accounts of individuals.
That said, the biggest perk of choosing to work with a Canadian currency broker is that your account will be insured by the Canadian Investor Protection Fund for up to $1 million against losses caused because of broker insolvency.
Having discussed in detail the regulatory environment in Canada, let us now look at the factors to be considered when choosing the best forex broker in Canada for online trading:
Regulation by IIROC
This is the first aspect you should take into consideration. You can easily find out whether a forex broker has IIROC registration or not. You just have to visit the Commission’s website. Further, you can perform due diligence using the Commission’s central registry which includes all important information related to registration, approval, and disciplinary action initiated against a broker.
In general, currency pairs are segregated as minor, major, and exotic. Major currency pairs consist of the USD and seven other most-traded world currencies. Minor currency pairs exclude the USD but have combinations of the most-traded currencies. Exotic pairs consist of currencies that are traded less. The Canadian forex broker you are planning to work with should be offering a few currency pairs from each category.
Spread is one of the key aspects related to forex trading. It indicates the difference between the buy and sell prices of currency pairs. Forex brokers make a profit through the spread. If the difference is more, the brokers make a higher profit. Typically, forex brokers offer tighter spreads on major and popular forex pairs. On the other hand, the spread will be wider for less popular currencies. Spreads can vary from one broker to another. So, choose brokers that offer favorable spreads.
Leverage and Margin
Leverage allows you to invest a larger amount than that is there at your disposal. You need to use leverage with a great deal of caution and complete understanding of the risks and dangers associated with it. This is because it can be your friend in favorable trades and foe in unfavorable situations.
For online forex trading, you need to necessarily have a platform. Most brokers offer web-based trading platforms. You can register on their website, sign in, and trade from anywhere in the world. If you are not comfortable with this type of a platform, you could choose a broker that offers a downloadable version of the platform which can be installed on your PC. In this case, you will not have the freedom to trade from anywhere in the world.
These days most brokers offer responsive trading platforms for smartphones and tablets (both Android and iOS) users. Then there is the most popular MetaTrader platform. You should spend some time in understanding as to which platform would suit you the best and choose a broker that offers exactly what you want.
You can look at the type of bonuses and promotions that brokers offer but it is not a good idea to make your choice purely on the basis of these things. Some of the other things that you must take into account include payment options available, deposit and withdrawal fees that are applicable, the time taken for processing payments, educational material and tools they offer, customer service, and communication methods, among others.
If you are a resident of Canada and looking for a regulated and legal forex broker, you can consider Questrade Inc. The company which was started in 1999 is a registered investment dealer in Canada and a member of both the IIROC and the CIPF.
Some of the key features offered by this forex broker are as follows:
Forex spreads offered are very low, 0.8 pips
More than 55 currency pairs made available for trading
No fees charged for opening or closing accounts
Demo platform available for practicing trades (features same as live platform, $50,000 virtual cash, 100 percent risk-free)
Account types: Margin account, Registered account, Fx and CFD account, Managed account
Depending on the method chosen, funds can be deposited in USD or CAD
Minimum deposit required is $1000