Choosing a forex broker can be challenging, especially when you are new to the forex trading world. Some people do not know what to look for. Some people only go by what others have said to them. Third parties can sometimes be deceiving. I have five tips to help you do business with someone more reputable.
How do you tune out the noise and pick a good broker?
The Right Security Changes Everything
You need someone who uses solid online security. The security has to be “top-of-the-line.” The broker you work with has to be registered with a regulation firm like CFTC or NFA. The two I mention are for people in the US. Do you want to trade outside of the US? Then, you will need to use places like ASIC and AMF. British traders should consider FCA UK forex brokers.
Do some research on every regulatory firm available. You can find the list online and pick someone from there.
You are going to contend with costs. You better prepare yourself for that now. Every broker uses transaction costs, though they may not be advertised.
Every trade has a payment. You either pay through a commission or spread. You need to know how your broker comes up with your cut. Some people like to use the lowest transaction cost there is. The only problem with that is the broker may not be as credible as you would want them to be.
“You get what you pay for.”
Some brokers cost a little bit more. That could be a sign you are working with someone who is more credible. The question you have to ask yourself: Do I want quality or quantity? There are some pretty shady brokers who use low costs to lure you in. You have to be smarter than that.
The Deposit and Withdrawal Dilemma
The deposit and withdrawal process should be as easy as you can get it. Easy in and easy out.
Here is the deal: There is no reason why a broker should make it hard for you. They are holding your money to use for trading. They stand to gain nothing by making the process harder for you unless he is doing something shady on the other end.
The Execution Status
- Your broker should be filling you in on the right prices as they come.
- The broker should be able to get you the “next best thing” if they cannot guarantee you the price they originally quoted you.
- Brokers who deal in shady business are the only ones who hold back on getting you the best status.
You should question their ethics if they begin doing that right out of the gate.
Customer Service Score Card
I am sorry to tell you, but no broker is going to do everything perfectly. They are going to mess up from time to time. That is when customer service comes in handy. You should be able to get in touch with their customer service department right away.
Do you have a problem getting hold of their customer service reps? Do they leave you with more questions than answers? That is a sign that you should question the validity of their firm.
Some brokers lure people in with false promises. They cannot be found once you sign the contract. You should be able to get in touch through phone, text, email, or other means of communication. Did you have much luck?
Say you hire a lawyer you saw on a tv commercial. You try to contact the person and cannot get a hold of them. They fail to return messages that do get through. The only time you see them is on the commercial.
The same thing applies to your broker. It is like using a shell company to funnel profits into your bank accounts. Something shady is going on. It is better to do your forex trading business with someone else.