According to estimates, the average traded value per day in the forex market is to the tune of $4 trillion, making it the world’s largest financial market. Forex trading is a high-risk activity and investors are susceptible to windfall profits and catastrophic losses. To trade in forex, you need to take the services of a forex broker. There are a number of forex brokers in the market and each one of them claims to be the best in the business. Therefore, as an investor, it is your prerogative to do the required research to choose a broker who will work according to your expectation. The following tips will help you in choosing a reliable forex broker.
Regulation – simply put, before you go into the nuances of how much money you will save if you choose broker X over broker Y, the basic and the first thing that you need to gather information about is the legal status of the broker. Most advanced countries around the world have proper laws in place, aimed at protecting the interests of users. Choose a broker which complies with the laws of the respective country. If you make the decision of trading with an unregulated broker to knock some dollars off from yearly transactional charges, you will really be on your own if a dispute arises later on. Besides, dealing with a regulated broker gives you the peace of mind that your money is in the hands of someone who is restricted by the law from engaging in any wrongdoing. So, once again, trade only with regulated brokers. In the US, a forex broker has to be a member of the National Futures Association (NFA) along with being registered with the U.S. Commodity Futures Trading Commission (CFTC).
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Unlike stock exchanges, such as S&P 500 and Dow Jones Industrial Average, forex trading does not have a central exchange because of which there is a substantial difference in the way brokers set their trading charges. Some brokers charge a straightforward commission, which is pre-determined percentage of the spread. However, a majority of brokers levy trading charges on the basis of wider spreads. As an investor, you need to take into account the trading charges offered by the brokers so that you can choose the best one for yourself. Usually, tighter spreads are more beneficial for the investors.
The value of customer support in forex trading cannot be undermined. It plays a pivotal role in effective communication between the investor and the broker. While choosing a forex broker, check the quality of customer service that is offered to you. In a competitive trading atmosphere as forex trading, an effective customer support can make the whole process of trading less tedious for you. There can be scenarios where you are facing technical difficulties with the trading platform, or a query that you want answered quickly; in these scenarios, a high-quality customer support team will try to resolve your issues on priority. On the other hand, if you choose a forex broker which provides little or no customer assistance, you run the risk of being on your own in times of need.
While making the decision of choosing a trading platform, you need to check what sort of trading platform the broker is offering to you. You can ask for a demo, or you can get insights about this on popular forums. A good trading platform will be well-designed and easy to use. It will give you the option of buying or selling a position with ease. Cumbersome trading platforms on the other hand will make it difficult for you to carry out even the most basic tasks. As we mentioned before, forex trading is a highly competitive market; you don’t want to miss out on a great opportunity because your trading platform has become unresponsive. Bottom line – choose a forex broker who provides you an easy-to-use and aesthetic trading platform.
These were a few tips that you should keep in mind while choosing a forex broker. Remember there are a lot of forex brokers that might promise the world to you, but not many will actually deliver on their promises. As an investor, it is your prerogative to find a reliable and high-quality forex trader.