Forex Broker Checklist: 5 Non-negotiable Qualities to Check Before Opening An Account
No matter how eager you are to start your trading journey, choosing a Forex broker without thoroughly checking its benefits, or worse, without reading about them at all, can have devastating consequences for your financial future. Not necessarily because that broker might be a scam, because in this day and age, scams don’t last long…
No matter how eager you are to start your trading journey, choosing a Forex broker without thoroughly checking its benefits, or worse, without reading about them at all, can have devastating consequences for your financial future. Not necessarily because that broker might be a scam, because in this day and age, scams don’t last long until they’re spotted, but because it can be in complete dissonance with your trading style and needs. Think of it this way: when you open a savings account, apply for insurance or purchase stocks, you don’t just walk into the nearest bank or pick a company at random; you make a list of options, read up about them online, compare them, and ask experts for advice. Forex trading is an investment vehicle, so if you should pay just as much attention to whom you entrust your hard-earned money. The good news is that you’re spoiled for choice when it comes to Forex brokers. Since the popularity of Forex trading has been soaring in recent years, brokers have been really good at keeping up with demand, and you’ll find options for all trading styles and risk appetites possible. But, before you get to the details, first you have to make sure that your future broker has these non-negotiable qualities that every trader needs:
Any online service that manages your money should be secure above all else, so you shouldn’t sign up for a Forex trading account without checking in advance that your broker is reliable and invests in online security. At a basic level, the easiest way to check a broker’s credibility is by looking at whether or not they are regulated. That is, if they have a license from one of the main regulatory bodies. In the United States, these bodies are the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC). However, choosing the best Forex broker isn’t just a matter of regulated vs. unregulated. First of all, the fact that a broker is regulated doesn’t mean it’s also the most convenient and right for you. Secondly, an unregulated broker isn’t necessarily a scam. For example, in the United States, the regulatory environment is so harsh and unreasonable that there are only three regulated Forex brokers: Oanda, GAIN Capital LLC (Forex.com), and TD Ameritrade. This imposes many limitations, which is why most traders use other non-native forex brokers that accept US clients. Even though they’re not regulated by US authorities, they have many satisfied users, better terms, and they’re secure. So, while regulation may be important, it can sometimes be a good idea to consider off-shore brokers too.
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2. Low transaction costs
No matter where you decide to trade, you can’t escape transaction costs. It’s simply a part of Forex trading. However, you can try and find a broker that doesn’t try to rip you off.
Transactional costs are the expenses incurred when you buy or sell currencies with a Forex broker, and they fall under two categories:
– Commissions: the operational costs that the broker applies to your operations
– Spreads: the price difference between where a trader may purchase or sell an asset. They can be fixed or variable.
In general, commissions are easy to identify on the broker’s website (many brokers even tempt traders with 0% commissions), while spreads are often hidden in the exchange rate, and traders might even pay up to 5% without knowing.
The best course of action is to compare the spreads to your style of trading and then review your options. For example, you may have to sacrifice low spreads if you have a low-risk appetite.
3. Smooth deposits and withdrawals
A reliable Forex broker shouldn’t make it difficult for you to withdraw the money you deserve so, when comparing options and reading reviews, always check withdrawal processing times and fees. The broker should also offer you a wide variety of withdrawal methods: debit cards, bank transfer, or alternative services such as Skrill and PayPal.
The withdrawal process should be smooth and straightforward, and the broker should have a dedicated page where they explain withdrawal terms and processing times. The same applies to deposits.
4. A stable trading platform
A good trading platform is the backbone of a professional Forex broker, and it will make or break your experience. In general, a trading platform should meet two criteria:
– It should be stable, error-free, and user friendly.
– It should offer extra features that enhance the traders’ experience. For example, features such as a free news feed, an event calendar, charting tools, and market sentiment indicators can offer you more insights and bring everything you need right in the dashboard.
MetaTrader 4 and 5 are seen as the most complete and convenient Forex trading platforms, but other good options include Ninja Trader and cTrader.
5. Good customer service
It’s almost impossible to trade Forex without having to contact customer support. And there are many reasons why this might happen, from delays with deposits and withdrawals to technical issues or just general questions about the broker. Addressing these concerns promptly and helpfully is one of the distinctive hallmarks of a professional Forex broker, so whenever reading a review, don’t skim past customer service.
While it’s understandable that you’re looking for a reliable broker who can offer you the best rates, there are many examples of such brokers who fail to be there for their users, resulting in negative experiences. Pay extra attention to how they treat after-sales support. Some brokers are quick to answer questions before the broker signs up to win them over, but they keep them last in line once they’ve become clients.
If you’ve decided to sign up for an off-shore platform, make sure the time zone isn’t a problem. Customer support should be available 24/7, and, if you’ve decided to go with an off-shore broker, check to see if they have a dedicated phone number for your region. This way, you won’t have to wait for hours until a representative gets to your message.
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