What to Check Before Selecting a Forex Broker
The foreign exchange market, otherwise known as forex, is a global financial market where currencies are purchased and sold. It is an over-the-counter market as well as the largest financial market in the world, with daily liquidity of roughly 5.5 trillion dollars. Over the last few decades, the market has grown exponentially in terms of participants and technology.
The participants involved in the foreign exchange market range from governments and financial institutions to currency speculators and investors.
If you are reading this, then you are probably interested in investing in the forex market. While the market could be very profitable, it can also be highly risky, especially for retail traders.
However, one way you can drastically reduce losses or minimize the risks that come with trading in the foreign exchange market is to select a good forex broker. Check your options on https://www.trusted-broker-reviews.com/, and find a broker that best suits your trading needs.
In this article, we have covered the factors you need to check before investing your funds with a forex broker. But first, let’s see who a forex broker is.
Who is a Forex Broker?
The foreign exchange market is not designed for traders to access independently, most especially retail traders. There is a need for an intermediary to connect these traders to the financial market. The intermediaries in this instance are companies that offer financial services, also known as brokers.
They foster conveniences during market hours, high liquidity, and margin trading. For every trade made by individual traders, the brokers charge fees and commissions, and this is how they make their profit.
You will find hundreds of brokers willing to take your money. As a matter of fact, finding a forex broker is as easy as searching for a word on a dictionary search engine.
However, not all of them are up to par. That’s why it is very important that you do your own research or simply go for one reviewed by experts. Selecting brokers should not be based on what the brokers portray themselves as in their marketing ads or their bogus bonuses. So, how can you then tell the best ones apart from the rest of the crowd? We have made the job easier for you. Here are the most important factors to check before choosing a forex broker for forex trading.
The Type of Forex Broker
The type of broker and the merits and demerits that come with using them is the first thing any potential investor needs to consider before making a decision. There are two main types of forex brokers with different modes of operation.
Dealing Desk Broker: Dealing desk brokers, also known as market makers, are brokers that take the opposite sides of trades. In this kind of trading, a trader’s gain is the broker’s loss, and the broker’s gain is the trader’s loss. Dealing desk brokers offer certain trading conditions that can be beneficial to traders, including non-fluctuating spread, nano lot, or small size trading, which fosters proper risk management.
Non-Dealing Desk Broker: Non-dealing desk brokers can be further categorized into two categories – STP (Straight Through Processing) and ECN (Electronic communication network). In the case of STP, traders are linked to other liquidity providers such as banks, hedge funds, and other brokers.
But in the case of ECN, traders are given access to interact directly with other liquidity providers, enabling traders to trade using the original spreads of the liquidity providers. Unlike the dealing desk, non-dealing desk brokers do not offer fixed spreads and small size lots.
Knowing these types of brokers and how they operate would definitely guide your choice as a trader. For instance, a new trader that wants to adopt proper risk management would most likely go for a dealing desk broker. Also, day traders would want to go for the non-dealing desk brokers because of the tighter spread they offer.
Compliance with Regulations
Another important thing to consider before choosing a forex broker is whether the broker is regulated or not. Each country has its own regulatory body. There are usually certain numbers assigned to regulations. For example, the United States uses the National Futures Association number, which is issued by the regulatory organization.
Brokers that do not have this number in their “About us” section should be avoided, as the safety of deposits might not be guaranteed. So, if you wish to have a secure trading experience where you won’t have to worry about the safety of your funds or information, it’s best to go with registered brokers.
Customer Care Service
Many traders do not pay attention to this, but customer service is essential. A good broker should ensure that contacting their customer support is very easy and straightforward. Forex trading occurs round the clock. So, the brokerage firm needs to ensure that they provide customer service that’s also available at any time of the day to offer answers to any questions or problems users may encounter on their site. Their contact methods should include phone, email, and live chat options.
Demo Account
The importance of demo accounts in trading platforms cannot be emphasized enough. Demo accounts allow traders to accustom themselves to the trading platforms before opening real money accounts.
Beginner traders are highly recommended to practice on demo accounts before entering live trades. It helps newbies get familiar with the market and the risks that are associated with it. Trade with brokers that offer demo accounts with unlimited access and virtual trading balances.
While their choice of forex brokers may not be the only reason traders lose money in the forex market, it goes a long way in determining their experience. If you want to succeed in the forex market, one of the most important things you must get right is the forex broker you select to trade with.
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The foreign exchange market, otherwise known as forex, is a global financial market where currencies are purchased and sold. It is an over-the-counter market as well as the largest financial market in the world, with daily liquidity of roughly 5.5 trillion dollars. Over the last few decades, the market has grown exponentially in terms of participants and technology.
The participants involved in the foreign exchange market range from governments and financial institutions to currency speculators and investors.
If you are reading this, then you are probably interested in investing in the forex market. While the market could be very profitable, it can also be highly risky, especially for retail traders.
However, one way you can drastically reduce losses or minimize the risks that come with trading in the foreign exchange market is to select a good forex broker. Check your options on https://www.trusted-broker-reviews.com/, and find a broker that best suits your trading needs.
In this article, we have covered the factors you need to check before investing your funds with a forex broker. But first, let’s see who a forex broker is.
Who is a Forex Broker?
The foreign exchange market is not designed for traders to access independently, most especially retail traders. There is a need for an intermediary to connect these traders to the financial market. The intermediaries in this instance are companies that offer financial services, also known as brokers.
They foster conveniences during market hours, high liquidity, and margin trading. For every trade made by individual traders, the brokers charge fees and commissions, and this is how they make their profit.
You will find hundreds of brokers willing to take your money. As a matter of fact, finding a forex broker is as easy as searching for a word on a dictionary search engine.
However, not all of them are up to par. That’s why it is very important that you do your own research or simply go for one reviewed by experts. Selecting brokers should not be based on what the brokers portray themselves as in their marketing ads or their bogus bonuses. So, how can you then tell the best ones apart from the rest of the crowd? We have made the job easier for you. Here are the most important factors to check before choosing a forex broker for forex trading.
The Type of Forex Broker
The type of broker and the merits and demerits that come with using them is the first thing any potential investor needs to consider before making a decision. There are two main types of forex brokers with different modes of operation.
Dealing Desk Broker: Dealing desk brokers, also known as market makers, are brokers that take the opposite sides of trades. In this kind of trading, a trader’s gain is the broker’s loss, and the broker’s gain is the trader’s loss. Dealing desk brokers offer certain trading conditions that can be beneficial to traders, including non-fluctuating spread, nano lot, or small size trading, which fosters proper risk management.
Non-Dealing Desk Broker: Non-dealing desk brokers can be further categorized into two categories – STP (Straight Through Processing) and ECN (Electronic communication network). In the case of STP, traders are linked to other liquidity providers such as banks, hedge funds, and other brokers.
But in the case of ECN, traders are given access to interact directly with other liquidity providers, enabling traders to trade using the original spreads of the liquidity providers. Unlike the dealing desk, non-dealing desk brokers do not offer fixed spreads and small size lots.
Knowing these types of brokers and how they operate would definitely guide your choice as a trader. For instance, a new trader that wants to adopt proper risk management would most likely go for a dealing desk broker. Also, day traders would want to go for the non-dealing desk brokers because of the tighter spread they offer.
Compliance with Regulations
Another important thing to consider before choosing a forex broker is whether the broker is regulated or not. Each country has its own regulatory body. There are usually certain numbers assigned to regulations. For example, the United States uses the National Futures Association number, which is issued by the regulatory organization.
Brokers that do not have this number in their “About us” section should be avoided, as the safety of deposits might not be guaranteed. So, if you wish to have a secure trading experience where you won’t have to worry about the safety of your funds or information, it’s best to go with registered brokers.
Customer Care Service
Many traders do not pay attention to this, but customer service is essential. A good broker should ensure that contacting their customer support is very easy and straightforward. Forex trading occurs round the clock. So, the brokerage firm needs to ensure that they provide customer service that’s also available at any time of the day to offer answers to any questions or problems users may encounter on their site. Their contact methods should include phone, email, and live chat options.
Demo Account
The importance of demo accounts in trading platforms cannot be emphasized enough. Demo accounts allow traders to accustom themselves to the trading platforms before opening real money accounts.
Beginner traders are highly recommended to practice on demo accounts before entering live trades. It helps newbies get familiar with the market and the risks that are associated with it. Trade with brokers that offer demo accounts with unlimited access and virtual trading balances.
While their choice of forex brokers may not be the only reason traders lose money in the forex market, it goes a long way in determining their experience. If you want to succeed in the forex market, one of the most important things you must get right is the forex broker you select to trade with.
The post What to Check Before Selecting a Forex Broker appeared first on .
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