1. Regulation: Since there is no central exchange, the foreign exchange market itself is not regulated. However, reputable forex brokers are regulated. If the forex broker is located in the US, it must be registered as a Futures Commission Trader (FCM) with the Commodity Futures Trading Commission (CTFC) and be a member of the National Futures Association ( NFA). Brokers registered with the NFA are listed on the NFA website.
2. Initial Deposit: Ideally, look for brokers who require a low initial deposit. Deposits for micro or mini accounts should range from $ 100 to $ 500. Deposits for regular accounts can range from $ 1,000 to $ 5,000 or more. While you want the initial deposit to be as low as possible, you don’t want to deposit such a small amount that your account is depleted after just a few losses. Only invest what you can risk.
3. Spread: The spread is the difference between the buy and sell price and is the way forex brokers make money. Naturally, we want the spread to be as low as possible. The spread range for the most commonly traded currencies is 3-5 pips. Look for a broker that offers a fixed spread rather than a variable spread that adjusts for market volatility. Variable spreads can negatively affect your trade and can sometimes take you out of the market by reaching your stop orders prematurely.
4. Currency pairs: Look for a broker that offers the most liquid currencies traded against the US dollar, including the Japanese yen (JPY), the euro (EUR), the British pound (GBP), the Swiss franc (CHF), the Canadian dollar (CAD), New Zealand dollar (NZD) and Australian dollar (AUD).
5. Lot size – If you are new to forex trading then you will want the minimum lot size to be as small as possible. Micro accounts have a lot size of $ 1,000, mini accounts have a lot size of $ 10,000, and regular accounts have a lot size of $ 100,000.
6. Adjustable leverage – Leverage it to control a large amount of money using only a small amount of money in your trading account. Look for a broker that allows 100: 1 – 400: 1 leverage. Many brokers allow you to select a leverage ratio as low as 20: 1 which reduces your overall risk but also reduces your potential profit per trade. Even if you don’t use the highest leverage, a 100: 1 – 400: 1 ratio is a very good option.
7. Trading platform: Trading software should be intuitive and easy to use with extensive technical analysis tools. Always take the broker’s trading platform for a test drive using a free demo account to familiarize yourself with its use before trading real money. Do not use a broker that has trading software that is difficult to use or does not allow quick and easy ordering.
8. Customer service: The forex market is open 24 hours a day and so should your forex broker. You should be able to call your broker at any time of the day if you have a question about an order or are having trouble placing orders, etc. Some brokers offer live chat from the trading platform itself, which is a great advantage.
9. Withdrawal of funds from the account: While most brokers use the same methods of funds from the account and withdrawals, look for a broker that offers the convenience of funds from the account and withdrawals with credit or debit cards. . Financing the account by credit / debit card is almost instantaneous and withdrawals are much faster (usually 1-2 days) than waiting for funds to be sent by check.
10. Reputation: You can research forex brokers using forex message boards like Forex Factory. Rather than focusing on isolated good or bad comments, look for a big picture of how people feel about a particular broker. A person with a bad experience does not necessarily mean that a broker is not trustworthy. When in doubt, just post and ask for feedback on any broker you are considering.
Choosing a forex broker doesn’t have to be difficult if you know what to look for. These 10 things to consider when choosing a forex broker should help you choose a broker that is right for you.