Picking the right forex broker is often the most important decision any new trader will make. In the past few years, there has been a virtual explosion in the number of forex brokers doing business. To the trader, this is great, as the number of brokers has helped lower the cost of trading and to provide better services and trading tools that were not available before.
Reputation is Everything
Unfortunately the foreign-exchange market is one of the most unregulated in the world, due in part to the fact that the exchange crosses national borders. With no authority to properly regulate the foreign exchange market, many investors find themselves with less than quality brokerages. It is recommended that each investor properly research each broker by searching for reviews about their service.
A Few Warning Signs:
High Spreads
Low Minimum Account Balances
Credit Card Deposits
Unresponsive Customer Service
Not All Broker Traits Are Bad
While there are a few warning signs to bad brokers – not all brokers that show these signs are bad. One low minimum broker, Oanda.com, offers accounts with as low as $1, and is known as one of the best retail brokers online. The site does not offer credit card deposits, which in the world of foreign-exchange brokers is nearly a tell-tale sign of a scam.
What You Want In a Broker
Thanks to the explosion of interest in the foreign-exchange market, investors are now able to pick a broker that would meet their needs entirely. Previously, investors had a selection of low minimum, low spreads, and good customer service, but you could only pick two. Today, you can find a broker that fits your needs perfectly, from top to bottom.
Find Your Trading Style
You need a broker that can accommodate you as a trader, here are a few trading styles and what they should look for in a forex broker:
Day Trader, Scalper- Day traders are likely to make many, high volume, trades each and every day. As such, day traders need a brokerage with low spreads, and the ability to do high-frequency orders. Also, day traders, which are usually day traders by profession, should look into the broker’s withdrawal process to see if it fits within their needs. Day traders may also want to look into the forex brokers trading platform and automation possibilities. Many brokers offer automation as part of their platform, while others require large API fees to use an automated service.
Swing Trader – Swing traders make fewer trades than daytraders and typically seek a higher pip profit per trade. As such, swing traders may put less emphasis on spreads and slippage, and more emphasis on the quality of the platform and charting options with the broker.