As you strive towards your financial goals, using an online forex broker offers numerous benefits.
However, looking for a broker from an array of the many online brokers could be a daunting activity, especially if you don’t have the necessary information.
The selection process is straightforward and easy if you have a good guideline with a clear understanding of what is a trading broker?
Who is a forex broker?
Apart from a proper mindset and trading strategy, having the most reliable forex broker at your side is crucial to your success and experience in forex trading.
An online forex broker is also known as a currency broker, is a firm or a person that provides traders access to trade in foreign exchange currencies on a trading platform.
10 Key Factors to Choose an Online Forex Broker
Below is a list of 10 key factors to consider as you choose a forex broker or aspire to be a forex broker.
1. Trading Platform
Online forex trading mostly takes place via the trading platform.
Therefore, consider the trading platform that is simple and user-friendly.
Related: Top online forex trading platforms 2020
While at the broker website or app should easily perform the following activities account opening, verification process, deposit, order executions, and withdrawals.
Also, look at other key features of the platform, such as news feeds, ease of using technical and charting tools, and trader information.
Nearly all forex brokers operate on Meta 4 trading platforms.
Meta 4 is a highly popular and effective forex trading platform used by over 85% of forex brokers globally.
Nevertheless, all forex brokers should avail of the array of platforms for their clients to choose from.
It is also essential to check if the trading is available on mobile apps and websites.
2. Trading Fees
A broker trading in foreign currencies makes a living from the profits realized charging commissions, fees, or spreads.
Thus, it is imperative to choose broker trading with cheap and affordable charges while providing high-quality services.
Remember that cheap is always expensive, therefore consider quality at a reasonable cost but not necessarily the cheapest.
Also, consider other charges such as withdrawal fees, minimum deposits, account maintenance, and minimum trading capital.
Forex trading brokers have different costs. There is no need to incur unnecessary charges that could be avoided.
3. Funding and Withdrawals
With a good online forex broker depositing and withdrawing, your funds should be straightforward and quick.
The forex brokers facilitate forex trading thus should not hamper the transaction of funds in your account.
It is also essential to consider forex brokers with available funding and withdrawal options.
The transaction options include bank transfers, PayPal, credit cards, skrill, and cheques.
4. Regulated Forex Brokers
Almost all forex brokers are regulated and governed by relevant bodies or institutions.
First of all, regulation guarantees the safety of your money in the custody of a currency broker.
Regulation ensures the playfield is fair and free from any trading manipulations.
It is a legal requirement for all regulated forex brokers to strictly adhere to relevant laws, rules, and regulations of your country.
Thus, before you entrust a currency broker with your money, check whether it is regulated.
Avoid being scammed by the unregulated online forex broker.
Regulated forex brokers are required to have a separate bank account for their clients different from theirs.
This requirement prevents brokers from withdrawing or using clients’ funds.
Additionally, should the brokerage firm go under, the regulation protects funds of the clients.
5. Customer Support System
As you also aspire to be a forex broker or trader, the customer support system is another important but often overlooked factor that involves solving issues quickly and effectively as they arise.
Carefully select an online forex broker with a 24/7 customer care system with efficient and reliable communication channels.
The communication channels include a phone call, email, online chats, and SMS.
You can test response time to your issues by making a call, sending SMS, or initiating a live chat at their website.
6. Trade Execution
The speed at which your orders are filled and executed matters a lot, especially to forex scalpers.
However, not all forex brokers can fill you at or very close to the order that you placed.
For instance, with a stable internet connection, if you tap/click sell EUR/USD at 1.2199, then execution should be at that price or very close to it.
7. Trader Resources
An excellent online forex trader has comprehensive free resources such as market analysis, trader education, and risk management tools.
Risk management tools such as stop loss and trailing stops are some of the features that will protect you against losses.
Traders’ information is available at the broker’s websites, brochures, or newsletter.
A free demo account is another trader resource to help you practice and perfect your trading skills freely before trading with real money.
An online forex broker without the free demo account is not worth considering.
8. Business Model
Dealing Desk broker (DD) and Non-Dealing Desk broker (NDD) are the two significant types of forex trading brokers.
Dealing Desk brokers often take the opposite side of a trader and handle clients’ requests at a firm’s computer.
On the other hand, NDD forex trading brokers pass clients’ orders straight to a third party, usually a financial provider.
ECN and STP are the two types of NDD brokers.
Broker business model is critical as it will affect the spread that you will receive and the type of spread, For example, fixed or variable spread.
9. Account Type
There are three types of accounts available for forex traders or entrepreneurs who want to be a forex broker. These are:
Micro account: it is the smallest type of account.
Mini account: one trading lot is equivalent to 10,000 units. Both micro and mini accounts require minimum initial trading requirements.
Standard account: one lot is equivalent to 100, 000 units. It requires a higher amount of trading.
Owing to varying minimum investment capital requirements, always select a trading account that complements your trading goals.
10. Value Added Services
The online forex broker has stiff competition for clients.
Hence some will automatically try to set themselves apart.
This broker might offer free technical analysis, Real-time forex news feed, and trading signals freely.
Conclusion
Choosing the best forex broker should be a deliberate and well-thought process.
Do due diligence and compare the key factors applicable to all forex brokers.
Nevertheless, these guidelines will assist you in much on picking a forex broker or even being a forex broker.
Choose an online forex broker with a good reputation, meeting your trading requirements while being duly regulated.
Must Read: Different Types of Forex brokers in Global Markets