There are many brokers to choose from but how do you choose the right one? This is a crucial question because as traders we need to have the right tools to give us that edge in trading. If you have the wrong broker it could ruin your chance of running a profitable trading business.
Trading Platforms and Conditions
This point refers to the features of the trading platform and the trading conditions with the chosen broker. Amongst the most important factors are:
Spread – Obviously the smaller the spread on currency pairs the better the conditions are for investors and traders.
Platform execution – Trading execution refers to how fast and consistent are the execution of trades. Some brokers guarantee fast and transparent executions during normal market conditions.
Fractional trading – Some brokers allow investors and traders to trade on a fractional basis, instead of trading full lots “100,000 units” or “300,000 units”, they allow you to trade “163,345 units” or “325,911 units”. This is very helpful for trades risking a certain percentage of their balance on each trade.
Safety of funds – We need to make sure our trading funds are kept in a segregated account or at least insured.
Trading platform – Easy to use and understand platform, is it reliable during fast moving markets? And what extra features it offers.
Minimum investment – What is the minimum amount of money required to open a trading account? This aspect is very useful because before trading your full account, you need to test the waters and see how well you perform with an account containing limited funds (after trading a demo account).
Margin (leverage) – What kind of leverage can be used with the chosen broker? Just to make sure our leverage requirements by our Forex strategy and methodology (leverage above 100:1 is not advisable).
Commissions – Some brokers charge commission, it is ok if they do if the spread is smaller than other brokers.
One click dealing – If your trading style is for the very short term and you need to get in the market as fast as possible once you get your signal this might be a good feature for you.
Advanced type of orders – Your strategy might need to be to use two orders and once the first once gets triggered you want your platform to cancel the other (OCO orders), etc.
Support for mobile devices – excellent when you have a day job and need to be connected to monitor your trades at all times.
Trade directly from the chart – Some traders like to trade directly from the chart, sometimes it can take a few seconds to switch from the chart to your quote panel where you enter your trades.
Trailing Stop – Nice feature for trend traders and traders who like to lock in some profits as soon as the market moves in their favor.
Meta Trader – Find out if your broker allows you to use the Meta Trader Platform the prefered platform for many Forex traders.
Customer service – This aspect is the most important of them all, are they rude to customers? Are they willing to help customers? These are the questions you should ask in forums and fellow traders.
If brokers are registered by their local regulatory authorities, you can visit the regulator website and you will find plenty of information about Forex brokers. Some of them publish resolutions regarding Forex brokers.
Test on a Demo Account
In this phase we should test your final list, first on a demo account to see how it works, if it fits your trading style and your system. If you are satisfied with the results, then try the same platform with limited funds to see how it performs on real trades. If you are satisfied again then open your full trading account with the chosen broker.
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