Choosing the right broker is vital to your success as a trader, and therefore requires time and research. In other words, selecting a broker out of the many that are available should be thought of as a process of eliminating those who seem unreliable and choosing among the few that you can trust with your money.
Here’s what you absolutely need to consider before choosing a broker:
The last thing you need when trading is not to know whether your money is in safe hands. For this reason, you should take enough time to see which brokers are credible and regulated by one or more regulatory bodies.
Here’s an indicative list of countries with their corresponding regulatory bodies:
- Australia: Australian Securities and Investment Commission (ASIC)
- Cyprus: Cyprus Securities and Exchange Commission (CySEC)
- European Union: MiFID Directive
- France: Autorité des Marchés Financiers (AMF)
- Germany: Federal Financial Supervisory Authority (BaFIN)
- Switzerland: Swiss Federal Banking Commission (SFBC) / FINMA
- United Kingdom: Financial Conduct Authority (FCA)
- United States: National Futures Association (NFA) / Securities and Exchange Commission (U.S. SEC) / Commodity Futures Trading Commission (CFTC)
Naturally, you need to ensure that the broker you choose has a good reputation and many satisfied clients. To do this, you should visit forums and read other traders’ reviews of, or experiences with, specific brokers. It would be better if you refrained from trading with a broker that has too many disappointed clients.
Execution & Trading Platforms
As any trader will tell you, it is vital that your orders are filled in the best possible price. Though a difference of a few pips may at first not seem like a big deal, it will prove itself to be more important than you think in terms of winning a trade. Under normal market conditions, and assuming that your internet connection is stable, your orders should be filled by your broker either at, or very close to, the market price shown.
As FX trading takes place through the brokers’ trading platform, you also need to make sure that the platform provided by a specific broker is stable and user-friendly.
Deposits and Withdrawals
If you are seriously thinking of trading, you should also do some research on deposits and withdrawals, which means that you should familiarise yourself with the different deposit and withdrawal methods that different brokers offer. You would, of course, want to deposit funds and withdraw your earnings as easily as possible.
It would be a good idea, then, if you also looked at other traders’ experiences with specific brokers and determined whether any had a hard time withdrawing their profits.
How can you start trading with a broker if you do not know exactly how much you are being charged for trading?
Every single time you open or close a position, you have to pay either for the spread or a commission. It is therefore vital that you try to find affordable and cheap rates.
You do need to remember, though, that cheap rates do not guarantee a reliable broker.
There will be times that you have questions, are unsure about a particular detail or product, or encounter a problem while trading. Naturally, you would want to be able to contact your broker during these times.
It is therefore very important that you find a broker that provides ongoing and sufficient customer service and is willing to answer any questions that you may have.