5 most important tips of choosing a Forex Broker
(Guest post by Olivia Young from Topbrokers.com)
Your choice of a Forex broker is going to determine how successful of a Forex trader you’re going to be, and it is one of the most important factors. However, there are just too many Forex brokers in the world right now that the choice of one has become incredibly difficult. To make the choice simpler for you, let’s boil down what you need to determine to just 5 of the most important factors.
In the Forex market, there are 5 types of Forex accounts – cent, micro, mini, standard and gold/premium. They only differ in the size of lots you can trade with every order. The standard account is the average account that lets you trade standard lots of 100,000 units while the cent, micro and mini accounts only let you trade smaller lots. Your choice of a trading account will depend on the amount of capital you have to deposit.
Trading high-value lots with a small deposit can risk your investment and lead to a margin call, while trading low-value lots will only bring in small returns. The trick is to find an account that balances what you’re willing to deposit, your risk appetite and how much profit you intend to make. When signing up with a Forex broker, make sure you know which type of accounts they have and choose the broker who offers exactly what you need.
Leverage is what allows you to control larger amounts of money with only a small deposit put down. Leverage will always be quoted as a ratio, and could range anywhere from 10:1 to 1000:1. The higher the leverage, the more money you get to control and the larger the sizes of your trades. Thus, a higher leverage has the potential to bring huge returns, although the risk is also higher. Since it is the broker that provides the range of leverage, find the broker with the leverage offering that best suits your risk appetite. Learn for about leverage here.
The broker will need to make money too, and this could be in the form of spreads, commissions or both. The spread is the difference between the price at which your order is filled and the actual market price. This difference is usually small, and the broker keeps it as the cost of the trade. On the other hand, some brokers will only charge a commission, which will be a percentage of the profits you earn. Then there are those brokers who will charge both spreads and commissions. Find out how the broker charges and compare those charges to other brokers so that you get the best deal.
There are so many permutations of currency pairs, given the number of currencies in the world, but there is no broker who makes all of them available. Still, you should go for the broker that offers the most currency pairs so that you get a wider variety to choose from. Some brokers will also offer stocks, commodities and futures through CFDs, and you should prefer such brokers, again, because of the number of choices offered.
Since you will be doing all your trading from a trading platform, you need to find out which ones the broker offers. MetaTrader is the most common platform and will therefore have plenty of add-ons like trading signals and technical indicators. Nevertheless, there are some other trading platforms that have their own benefits. The choice will come down to which platform you’re familiar with and which one you find easiest to use. After that, just choose the broker who offers that platform.
Besides these 5 tips, there’s a lot more to consider when choosing a Forex broker, and you can find out at this TopBrokers website. There, you will also learn more about the 5 tips mentioned above so that you can make the most informed decisions.