Throw the Bum Out – Find the Best Broker For Forex Trading
By Colon McRae
Attributes of the Best Forex Broker
The amount of choice when selecting a broker in the modern day is massive with so many brokers all claiming to be top in their class and offering incentives to entice traders to invest your money with them, it’s hard to separate the mediocre brokerage firms from the true professionals. A traders ultimate decision on why they choose should depend on their individual trading needs. The following are seven attributes a good forex broker should have.
1. Spread Type Offering – A good forex broker will offer a fixed spread. Although this means a trader may not always have the highest possible profit, it will give the advantage of predictability. Forex brokers make their profit on the spread (the distance between the pips in the currency’s quoted price). Although fixed spreads are usually somewhat wider than the narrowest variable spreads, they can be safer over the long term.
2. Leverage Options Choice – A broker that provides a variety of leverage option choices gives the trader greater control over how much risk they take with each trade. Using less leverage when trading exotic currencies than when trading well-known, stable currencies for example is a good strategy. Although lower leverage means lower risk of a margin call (replenishing money in the trading account) it also limits your possible profit. If however your capital is limited, in order to turn a profit you’ll need a broker who offers high leverage, even if that’s the only type of leverage you can get.
3. Technical and Fundamental Analysis – A good broker should provide their clients with a certain level of technical and fundamental analysis, market research reports, and other data necessary to make informed trading decisions. The decision on what broker to use is an important one and before deciding on a particular broker it is sensible to draw up a list of the types of tools and data needed to trade and consider how much of what the broker provides will actually be of benefit.
4. Client Support and Assistance – Time stops for no man and neither does the forex market which should run for 24 hours a day at a good brokerage firm. This same brokerage firm should also be able to offer support around the clock. As a trader you want to know that if you run into a problem with a trade you’ll be able to reach a live person in the brokerage firm immediately. ‘Business hours only’ support isn’t sufficient especially if there are time differences between business hours at the firm’s company headquarters and the trader themselves.
5. Not Overselling – A good broker is one who doesn’t oversell what they can do and offer or make unrealistic promises about performance. Brokers who claim they can eliminate the risk of financial loss are also attempting to deceive potential clients and should be avoided at all costs. Remember a good broker can never guarantee a profit, even the smallest of profit.
6. Sniping – Sniping occurs when a broker buys or sells at preset points solely in order to increase his or her own profits. A good broker would never do this and when a broker does undertake the practice of sniping it isn’t going to do anything good for the investment capital.
7. Recognized Registration and Financial Backing – A good broker will have legal registration and solid financial backing and are the minimum that should be expected. It is always sensible to check that the forex broker is registered with the Commodity Futures Trading Commission (CFTC) as a Futures Commercial Merchant (FCM) as this is required and tells the trader that the brokerage is government regulated.
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