The forex industry has seen rapid growth in the number of forex brokers in recent times. With no central marketplace of its own, you must find the best currency trading broker to help you conduct the trades. Finding a reliable broker is one of the biggest trade to make. You are investing all your hard-earned cash to that firm with the anticipation to make profits. You can be the most experienced trader, but if a brokerage firm rip-offs your capital, all your experience was valueless.
With the growing number of forex brokers, it can be quite confusing on how to choose the best. The guide below offers great tips to choosing the best currency trading broker
Let’s dive in and get started!
- Proper regulation
This is for the most important feature to look for when choosing a brokerage firm. Proper regulation means the broker meets the minimal requirements to operate as a forex broker. That way, you are assured of the safety of your funds and fair dealing practices. These regulatory standards differ significantly depending on your country. A good example of the regulatory website is the US forex regulation.
NFA is one of the popular agencies regulating currency trading in the US. Any broker who executes trading without registration faces serious legal actions. Also, the brokers are only allowed to offer a maximum of 20:1 leverage on minor currencies and 50:1 on major pairs. Therefore, choose a properly regulated broker for your trading account.
- Data security
When starting forex trading, you must provide a lot of sensitive information. Most brokerage firms will require your bank account details, credit cards, utility bills, personal information and more. Without strong security practices, your personal financial information may be stolen. The best currency trading broker should work closely with a reliable internet security provider such as the McAfee Secure.
- Trade execution
The best currency trading broker will ensure your trades benefit from the best rates. Forex brokers fall into two groups: the market makers and the STP brokers. Market makers take the opposite side of a trade. If you gain, they will lose and if you lose, it will be their gain. Their business model is meant to counterbalance the market risk between your traders and those of other clients.
On the other hand, STP brokers have no direct control of quotes. Instead, they offer floating spreads that expand when markets keep fluctuating as well as the periods of illiquidity. Dealing with STP brokers will allow you to assess the complexity of the market as well as see the best rates offered.
Also, check on the re-quote policy when choosing the best currency trading broker. No re-quoting means you are not allowed to execute trades when the market prices are volatile. Instead of filling the rates appearing on screen, a forex broker will ask you to choose a new rate. That way, you can avoid losses or miss on potential gains. If you fail to meet margin calls, a forex broker will close all the positions moving against you. As a result, you may incur more negative balances than what you have in the account. To avoid such circumstances, always trade with a forex broker who offers negative balance protection.
- Product coverage
Forex trading allows traders to execute more than just currencies. The best currency trading broker allows traders to make the most out of forex trading using a single account. Therefore when choosing a brokerage firm, ensure they offer a broad product coverage.
- Commissions and fees
In currency trading, costs have a huge impact on productivity. Small differences can add up with time, especially for active traders. As a trader, you must find an affordable forex broker for your trading activities. That way, you can save a lot on the trading costs. However, going for cheap brokers comes with trade-offs. Costly brokers are known to offers a wide range of services such as trading tools, excellent customer support and more. This is something you may never get from a low-cost broker.
The bottom line
This is just but a few tips to help you choose the best currency trading broker. A good forex broker should offer quality customer services that easily accommodates your budget.