How many times have you heard of scams involving Forex brokers? What were their “promises” to woo clients into opening an account and then funding it? Some common bad practices include wide spreads when prices are slightly more volatile and the difficulty in withdrawing your funds.
Gone are the days where you need to find out if your broker is a Market Maker (MM), Straight Through Processing (STP), or Electronic Communications Network (ECN). The brokerage industry is highly competitive, leading to low trading cost and subjected to regulations.
So do not worry about which category the broker you are considering falls in to. There are a handful of far more important questions to start off your journey to become a successful trader.
#1 Tight Bid Ask Spread
A good broker should have a tight bid ask spread. There were times where my order got filled and I was down 15 pips immediately. Initially, I thought that it was once off. I was wrong. This happened twice and I changed my broker.
#2 Available Pairs
At the start, focus on the major pairs. This is the most basic item which all Forex brokers should have.
It’s highly recommended that you open a demo account to check out the list of currencies the broker provides given that you may be interested in some more exotic pairs such as EUR/HKD and USD/SGD.
Remember to pay attention to the spread too.
#3 Regulation
Forex trading is decentralized. Even though there is no exchange to regulate the currency market, there are regulatory agencies around the world. One such agency is the Australian Securities and Investments Commission (ASIC).
#4 Funding
Funding (deposits and withdrawals) of your account must be easy and short. It should not take more than a week for withdrawals.
Do a little search on the time needed to receive your cash upon withdrawal. To be totally convinced, you can open a brokerage account and deposit the minimum amount. Try withdrawing after a week or so.
#5 User-Friendly Platform
Is the trading platform easy to use and intuitive? Does it have the functions that you want?
Look at the time shown in the platform as you may want your local time zone to be displayed.
If you are looking to backtest or code your own trading system, you will want to look for brokers who are also on the MetaTrader 4 (MT4) and/or MetaTrader 5 (MT5) platform.
#6 Admin Support
A good broker should have a hotline and a fast response rate. This reduces the risk of financial shocks, lost opportunities, and will put your mind at ease.
Conclusion
Choosing the right broker for yourself is subjective. With the checklist, this search can be made more objective.
Feel free to open multiple demo accounts across the different brokers to have a feel of their platforms. Select the one that’s best suited for you and remember to test the broker’s credibility by withdrawing your funds after some time.
Here’s a bonus for all your hardwork.
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