There is no dearth of forex brokers out there in the marketplace willing to take your cash and help you make your first trade. Some of them may offer you a mini forex trading platform, while others may offer a standard account. There are also brokers who could offer you a combination of both, or even offer the facility of having a managed forex trading account. Therefore it is certainly intimidating and cumbersome to find a good broker that could help your profits grow instead of simply walking away with your investment. Ultimately your broker’s credentials go a long way in establishing your forex presence in a profitable manner.
You should test the execution ability of the forex brokers you have in mind and ascertain the speed of the broker’s order execution system. Also figure out from other traders the loyalty of the brokers and find out for example if they were trading against their own clients.
Then carefully assess the leverage options of your forex broker. Leverage, which is usually given in a ratio, would tell you the proportion between the total capital available for trading versus your actual capital. Remember that leverage plays a vital role in the forex trading as the price deviations are set in fractions of a cent. Choose a forex brokers with flexibility in their leverage margin so it allows you to opt the leverage that best suits you.
Here are a few tips that could help you in selecting a good forex broker.
1) Avoid any forex broker that claims there is no risk in trading the forex market. A legitimate forex trader would always tell you that there is a risk element attached to forex trading. A good broker would also tell you to invest only those amounts of money you could well afford to loose. Avoid any broker that sounds too good to be true.
2) Check the broker’s background in the same way you would check the background of a potential employee. Avoid any broker who provides you with insufficient background information. A broker that gives you access to their own customer’s experiences with them, would be ideal, as that gives you the opportunity of checking up with other customers. For example some brokers provide customer references in their website. Some brokers also have customer forums operating on their website too. This affords potential customers like you to get onto the forums and discuss with other clients the merits and demerits of the broker you propose to engage. If a broker indulges in deceptive trade practices, it would surely find mention with the National Futures Association. So you would do well to check up on that. A company registered with the relevant authorities is likely to be more legitimate than those that are not.
3) A broker that offers you great profits in a short time is nothing but a “bucket shop.” Run for cover the moment you come across one. Remember there is no such thing as making guaranteed profits in forex trading.
4) Make sure the broker you eventually select is registered as a business in a country with strong legal remedies. Be wary of dealing with a broker situated in a country that has high incidence of corruption and bribery.
5) Make sure that your broker does not make you responsible for more money than you actually deposited. In other words, you should check on the margin requirements of the broker you select. You must have a clear idea of your broker” s approaches to margin requirements before you actually start dealing with them. Now this is an important point. Never engage a broker unless you are sure about their margin requirements.
6) Avoid any broker that says they are a pretty safe broker, because they trade in the interbank market. That is because the interbank market is a highly unregulated market and most of the rogue brokers operate in those markets. So beware of fancy terminology used by some brokers.
There are a few other ways to evaluate a broker. For example, you could refer to websites that compare brokerage firms, attend forex training courses, and may be check up with an experienced trader. One of the best ways to select a forex broker would be to visit the most popular forex forums and obtain the views of other traders who are already in the market. In spite of all the care you take in selecting a forex broker there is always the chance of a particular broker going bust. Nevertheless doing any of the things listed above could help you make a great choice in selecting a good broker.