If you are planning to make a career out of forex trading, then the first job that you have to do is to choose the best forex broker to partner with. There are many factors that you have to keep in mind when choosing a forex broker. However, in this article, we are listing the five most important among all of them that would help you to determine the quality of service that the forex broker would provide.
Factor #1: Quick execution and processing of transactions
For those forex brokers that are focused on lower time frames, the transactions should be executed at the earliest to avoid losses. When important news or data is released, then for some brokers it is important that their data sheets are filled quickly and transactions are executed right away at a price quoted by the trader. A small delay means a great reduction in profits. Waiting for even a fraction of a second may cut down the profit to a large extent. This is because currency prices can drop several pips, say 100 pips, within one second. This is dependent on the importance or relevance of the news that has been released. In such a case if the execution is not done instantaneously, then the trader should be wary. It may be that the broker is making money out of the new trader through slippage. Most likely the broker is not an honest person. Any honest broker should only make their money through the spread/commission that they charge the trader. All other methods employed by a broker are ways of cheating the trader.
Factor #2: No dealing desk broker
It is important that your forex broker does not have a dealing desk. In case they do have a dealing desk, it may happen that your transactions are placed in a book where you keep company with traders that are not very successful. If you are new, then it is likely that you will be placed in the ‘less preferred’ book. After this, you will have to prove yourself to be successful to be moved into the book where you keep company with those traders that are successful. This is not fair as you do not have to prove yourself o anyone after all.
It is not correct to classify your trades or your judge your personality on the basis of a forex trader account. The best exposure for any trader to improve his capacity is to trade in un-manipulated and free market conditions from the very start of your trading career. As it is merely a business model, you have every right to trade freely in the forex market. The broker gets to know all your trading details by scanning your trading account: your profit target, stop loss, trading history and success rate. Then they decide as to where to place you from where you will conduct your trades and help them to make maximum profits.
Factor #3: At the end of it all, it is your money
Whereas some brokers do not allow traders to indulge in scalping in the guise that it is not ethical, the truth is that nothing is unethical. The bare truth, however, is that any type of trading is ethical unless it involves cheating methods such as trading on the basis of insider knowledge or prior knowledge about news release. If you are involved in any other method of trading other than these illegal ways, the choice of which trading method to adopt is completely yours. If your broker bans you in such a case, then the problem is his and not yours. You have been stopped from trading because profits are less from you. It is not a good idea to work with such a broker.
As the money is yours, you should be allowed to choose the method of trading that you want to adopt. You should be allowed the freedom to open and close the trades whenever you want it. It may even mean a loss of money. The forex broker should be away from your trading activities. The forex broker’s only lookout should be in providing the trader with a professional trading platform that gives a view of the forex market in such a manner that the forex traders are not cheated of their money.
Factor #4: Consider the security
A very important consideration is the security of a broker with who you are planning to partner. It is not a simple matter to hand over thousands of dollars to a forex broker without knowing their credentials. It is not very difficult to check the credibility or legitimacy of forex broker. Any legitimate and trustworthy forex broker would have registered with one of the regulatory agencies that are meant to differentiate between the legal and the fraudulent ones.
The regulatory agencies vary by the country. Whereas in the US it is the NFA (National Futures Association) and CFTC (Commodity Futures Trading Commission), in the UK it is the PRA (Prudential Regulation Authority) and FCA (Financial Conduct Authority). Australia has its own authority called the ASIC (Australian Securities and Investment Commission) and Switzerland has the Swiss Federal Banking Commission (SFBC).
Before entrusting your money with a forex broker, it is important to ensure that the broker is a member with any one of the regulatory bodies that are mentioned above.
Factor #5: Deposits and Withdrawals
Any forex broker of repute will allow their traders to deposit fund and withdraw their earnings without any hassle. They have no reason to make the earning withdrawal process a tough one because they do not have any control over your funds and all they do is facilitate a platform for you on which you can trade. Any forex broker holds the trader’s money to facilitate trading and make it an easier process for the trader. Therefore any request for withdrawal by the trader should be smooth and speedy.