Forex is one of the most liquid financial markets that attract more investors year by year. By 2019, the total daily turnover is equivalent to $5 trillion, having grown from $1 trillion twenty years ago. This knowledge makes it one of the most liquid and attractive financial markets with 24/7 availability. For successful Forex trading, a trader needs to choose a service provider, namely a brokerage company. This choice should be approached thoughtfully and thoroughly. The correctness of this choice in the future will depend on your financial success. During this year we have written many articles in which we paid attention to the specifics of the work of brokerage companies. We worked for this score for a long time and now we would like to bring it to your attention.
Retail clients are not allowed to trade on interbank
Support sales teams are willing to force you to fund an account immediately
Over five certificates from the solid regulators
Multi-languages support (15), the user interface is available on 20+ languages
Withdrawing from PAMM before the period comes will charge additional fees
Very solid and welcome customer support service
The most common option in choosing Forex broker
Every brokerage company has some criteria and average features to be compared. Lets take a look at the main of them:
Affordability. Each brokerage company sets its minimum deposit threshold value for funding. Typically, this amount starts at $100. Novice traders must make a balanced decision for themselves on how much they can afford to lose. At the same time, you should pay attention to whether the broker fits for you, or whether you should choose another one that is more suitable, but with a higher minimum level of the first deposit.
Deposits and Withdrawing. This option is no less important than the previous one. You, as a trader, should easily manage your funds and, if necessary, withdraw them quickly and without high commissions. The brokers money returning duty determines its decency and reliability.
Market coverage. You have to check the availability of trading needed currency pairs.
Trading terms and trading fees. This option is very important because the appetites of forex brokers can vary dozens of times. Before you get started, you should calm down and calculate how much youll give to the brokerage company from the moment you start trading until withdrawing your money in a way that is convenient for you.
Trading platforms.There are many of them. Theyre a sword and shield of yours. Depends on features that you allow to customize and working speed youll be able to experience which one suits you the best. Personal presets are a huge part of your trading success.
Mobile app. A lot of people prefer fully-automated trading robots. Their performance can be checked without a PC. Its an important option that allows you not to work on a PC and be mobile.
Customer Support. Its a very important option, especially for beginners, but its hard to check it without directly contacting the support.
Reputation. Its an important part because trading is all about trust. If you see people angry at the company, so, you can entrust your funds and feel that your money is in safety.
Regulation. Before getting started, you have to check how the brokerage company works with your countrys laws. A lot of them have got some restrictions. If you skip this step, youll probably be able to fund the account, but youll have a huge problem with withdrawing.
The base of knowledge. The solid brokerage company provides a lot of courses, as well as, literature and material to let you get a smoother start in Forex trading.
User Interface. Everything should be simple and predictable in order to help you to make quicker decisions and be a better trader.
Picking the best Forex brokerage company: completed guide
Lets describe more detailed some of the most important brokerage companys features.
Here we go regulation. In our opinion, this is the most important and fundamental option in the brokers work, directly related to how much investors will trust it with their money. Regulators are interested in the stability of the Forex market and the transparency of financial transactions. Due to the huge volume of assets (more than $5 trillion), there is always a risk that drug dealers, arms dealers, corrupt officials, and other dishonest people and organizations want to use Forex as a laundry machine for their capital.
We would like to note that there are several regulatory organizations. As a rule, the more solid and successful the broker, the longer it operates on the market and the more capital traders manage through it, the more organizations assign it an appropriate level of security and transparency.
The list of the most influential regulators look like:
NFA (The National Futures Association) in The United States;
ASIC (Australian Securities and Investments Commission) in Australia;
CySEC (Cyprus Securities and Exchange Commission) in Europe;
FCA (Financial Conduct Authority) in The United Kingdom.
There are other regulators, such as those based on offshore islands. We believe that companies that have received certificates in offshore jurisdictions cannot be as reliable as brokers who received them from our listed regulatory authorities.
There are few types of account brokers can offer.
The first type is a live account. You fund it and trade for real money. Everything you do on the account becomes your gain or loss.
Most demo accounts are designed to let new traders try the service, see how a brokerage company works and can test the application of various strategies before investing in real money in trading.
Choosing a trading platform youre most comfortable working with is no less important than choosing a broker. The main thing for the trader is not only that the platform lets you easily manage every days duties, but also the broker supports the work with this platform.
cTrader and MetaTrader are the most popular across the traders platforms. Metatrader provides two versions of it: MetaTrader 4 and MetaTrader 5. These platforms are quite complicated for beginners. cTrader is a wise simpler one and fits for every skill of traders from professional ones to brand new investors.
You should also pay attention to how convenient and fast the Android or IOS based applications. It can be either a proprietary application from a broker or a MetaTrader one.
There exist several types of brokers: Market Maker Brokerage companies and Direct Market Access ones. DMA brokers separated into two types ECN and ECN/STP.
Electronic Communication Network (ECN) brokers allow you to trade only between other traders. So if no liquidity is on the market, your trades will get slippage, and you get a requote. ECN system removes the base of the potential conflict of interests between a trader and brokerage company.
Using ECN allows you to trade throw large financial institutions or global banks. The traders got access to the interbank market directly to see a clear picture of whats happening in markets.
ECN/STP. Straight Through Processing is the technology used by ECN brokers for placing trades on the market. FIX (Financial Information Exchange) protocol uses to place orders to the counterparty.
The FIX protocol is needed to decrease the needed time for performing trades, reduces slippage and make sure that traders get the best possible price. Some of these brokers can prevent requoting and reduce slippage.
Depending on trades and trader account the system decides what performing method is the best for the customer.
STP is applied when theres enough liquidity to a particular trade. If theres a lack of it, ECN takes liquidity from the inner network.
ECN/STP combination allows traders to perform their deals faster.
Market Makers (Dealing Desks). Its a type of brokerage companies where the company becomes a market maker The brokerage company always provides needed liquidity but, as well as, always trade against its customers that can be a reason for a conflict of interests.
Leverage is necessary so that traders with small capital can benefit from trading. This capital gives loans to a liquidity provider through a forex broker directly to a trader to expand trading volumes. The trader himself or herself is fully responsible for these funds and their return. Leverage is usually displayed in a ratio format, for example, 100:1, which means that one unit of traders money for one hundred borrowed units. This also means that trading volume will increase one hundred times. Using large leverage significantly increases the risk of trading. In turn, many regulators can limit the maximum allowable leverage that a broker can offer its clients.
Spreads are measured in pips and show the difference between buying and selling one currency to another in a currency pair. This is a kind of brokerage commission for access to the market. You can also get a lot of very important information from the spreads.
For example, the closer the buy and sell prices are, the more profitable its for a trader to work with this broker for these currency pairs. Thats why, often, traders choose different brokers for different currency pairs.
The better than the average broker has got over 40-50 forex pairs to trade.
The hedging option is designed to have insurance in case of adverse market conditions. One of the most common strategies is direct hedging. Brokers themselves do not always support this option for their clients.
The scalping strategy allows the trader to profit from quick, usually associated with news, price changes. This strategy is designed to make a profit in a short period of time until the market calms down. Traders applying this strategy usually trade during the day and close all their deals in the evening.
What should I do the first looking for the Forex brokerage company?
First of all, you have to take a look at the amount and availability of demo accounts. The new investor has to know whats going on in the market, how to customize MetaTrader or one of the other platforms. It takes some time before you get ready to fund the first real account of yours. Usually, demo accounts expire quickly, so youll be able to renew it (them) to practice more. During this period you have to read some books about trading strategy and you should pick one that fits you the best. As well as, books there are infinity video courses and various webinars from educational to the next week trading goals ones.
How do I know the brokerage company is good for me?
So Its the complicated question to answer to. First of all, if youre a beginner, check the availability of demo accounts. The second one is the fees. Its very important to know exactly from the start how much money youll have to pay from each, as an example, $1000 profit from the moment of having this amount of money on the account for withdrawing it by the payment system that fits you the best. The third one, check the brokers certificate. Youd better start working with the forex broker that has got a certificate provided by the regulator from your area, where your country from in order to not mess up with financial regulators, as well as, the texas department.
How often a brokerage company trades against me?
Its the wrong question. The broker will be trading against you only if youre willing it choosing a brokerage company with Market Maker type. If youre not okay with that, ask the brokers support to know what kind of the brokerage company they really are.
How we told before Market Makers get money trading against you. If we talk about all trading companies in general, all brokerage company makes money from the difference between buying and selling prices, as well as, for charging fees and commissions.
Brokerage companies are interested in providing various payment methods for their customers. Usually, Bitcoins are acceptable, but other cryptocurrencies are not. Dont forget most of the brokerage companies allow withdraw only by the payment method you fund the account for avoiding money laundering.
Futures and Options trading carries high risks as well as high rewards. You must be aware and willing to accept the risks to invest in the markets. Never trade with money you cant afford to lose. Past performance of any results does not guarantee future performance. Therefore, no representation is being implied that any account can or will achieve the results indicated in this website.
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