Trading Forex is one of the quickest ways to make real money if you know what you’re doing and are also working with the scam less Forex Broker. However, even though you might have the necessary knowledge and experience needed to trade successfully, your chosen Forex Broker may fail you and even make your trading experience hell on earth. That’s why you need to work with professional brokers who also appeal to your needs.
Why you need to choose the Scam free Forex Broker who is also reliable
Some of them trip Stop Losses (SL). Others have high spreads that sometimes make it hard for traders to make money. And then there are scammers who try to steal their client’s money using the most unprofessional of ways. They intentionally jam the trading platform when trades are going against them, i.e. if they are not a true ECN broker. This is very important to take note of because we have two types of Forex Brokers; true ECN brokers and dealing desk brokers.
The difference between the two is that the former lets you trade directly in the market. No middlemen involved, hence you are treated to first-hand market exposure. The latter is a market maker who controls most of your trading activity, from how you set your stop losses to how you take your profits and place trades. There can be execution delays, and this can determine whether or not your trades will be profitable.
Unlike binary options, Forex trading doesn’t have time limits. You can place a trade today and let it run until it hits your Take Profit (TP). Then it locks your profit in place. The opposite is also true. You can let it run, and based on your wrong analysis and prediction, it will hit your Stop Loss and you’ll have to accept your losses.
So once you understand the above things, you can begin searching for the best Forex Broker, and this is the ultimate guide for doing so.
Regulatory compliance in Forex Trading
The National Futures Association (NFA) is the main organization that governs brokers in the U.S. A reputable Forex Broker will also get their company registered with the U.S Commodity Futures Trading Commission (CFTC) to qualify as a Futures Commission Merchant and a Forex dealer.
The NFA is entrusted with the role of developing rules, programs, and also services that govern the integrity of the money markets, brokers and their clients in general.
On the other hand, the CFTC is an independent agency which governs commodity futures and the options market in the U.S. CFTC has the role of protecting users and the general public from scams, manipulation, and abusive practices which may take place during the sale of commodity, futures and options. But it also encourages fair practices in the sale of commodities, futures, and options.That aside, a trader needs to know that a flashy website doesn’t necessarily mean that a broker is registered with these organizations.
If a Forex Broker website is registered with the NFA, they will state their membership number on the website. You should find this information right at the footer of the website in question to avoid scams.
Nevertheless, take note that brokers who operate outside the US may have different governing bodies which dictate how they operate. It is always good to consider if a broker is registered and doesn’t have any dispute with their current registrar or license.
Features to be noted for different Forex trading accounts
Apart from knowing that your ideal Forex broker is registered, it’s important to study the features of the different trading accounts offered to clients.
(a)Spreads and commission
If you are a newbie in this business, you might get confused when a broker states that they don’t charge commission, but spreads are floating or tight.
As a matter of fact, many Forex brokers opt to profit from spreads instead of charging commissions on trades.Spreads basically mean that your broker will activate your TP or SL a few pips above or below the predetermined points. Let’s say you went long/bought the EUR/USD pair at 1.3943 entry price hoping to TP at 1.4000, your broker would lock in your profits a couple of pips above the 1.4000 mark. It could be 1.4005, 1.4010, and so on. This difference in pips is what lets them profit from your trades.
Moreover, you should realize that some brokers have floating or fixed spreads. These Forex brokers might also state that spreads are high depending on market volatility, and may not be fixed at all time. You need to consider how this information will affect your profitability.
(b)Minimum deposit, margin, and leverage
Just like Binary Options brokers, most Forex brokers will set minimum deposit for their trading accounts. If you’re just starting out, it’s recommended that you look for a broker who has small capital requirements. $100, for instance, is good to start with on a Micro account. Then you can grow it afterwards.
There are 3 different types of account you should be familiar with. These include Micro, Mini and ECN (make sure you do business with true ECN brokers, not brokers who pretend to be true ECN when they are not).
A Micro account will let you trade with positions as little as 0.01. A Mini account will let you trade with positions as little as 0.1 onwards. Also, because of the difference in volumes which you can trade with, your margin requirement will vary. Basically, margin is the amount of capital you need to remain in a trade. If your margin is too low, you might be forced out of a position if it was a losing one. Speaking in terms of leverage, you should realize that this tool is good and bad for you at the same time.
Leverage is the amount of money that your broker will lend you based on how much money is available in your trading account. Leverage is usually quoted in ratios. You might see something like 1:100, 1:200, 1:500 etc. These ratios let you multiply position size according to your trading style. If, for example, you’re entering a position and you have $100 on leverage of 1:500, you’d have 100 X 500 to trade with. It basically lets you trade with money you don’t have.
A word of caution
Once you taste the power of leverage and realize how sweet it is (because it multiplies your profits tremendously), you can come up with strict money management rules to avoid blowing your account in minutes.
If you start with small capital, you will need a significantly higher leverage to make substantial profits. If you take a currency pair like EUR/USD, you’ll be able to trade with any pip value that your leverage/margin will allow you. The higher the leverage, the more your profits, or losses can be magnified.
(c)Ways to deposit and withdraw your money
The best Forex broker will want to offer various ways of funding your account and withdrawing money from it as well. The most common forms of payment are Visa, Credit card, Wire transfer, Skrill and PayPal. However, other brokers have since added Western Union and other forms of payment to accommodate the needs of their clients.
The bottom line is, regardless of which broker you choose, their means of letting clients fund their accounts and also withdraw profits should be convenient for you. Take note that some brokers will have fees for transacting payments to and from their client’s accounts. If fees are applicable, make sure you are working with a Forex broker whose fees is very affordable.
Currency pair offered
The wider the choice of currency pairs/metal pairs and other commodities, the more trading opportunities you will have. We like to work with Forex brokers who have more than 20 currency pairs because we are guaranteed that the right trading setup will always be available in any of the pairs. Also, depending on your trading style, you may want to work with just a few currency pairs. If this is so, make sure those currency pairs are present to avoid disappointments.
Customer service is a very critical factor to consider. This is why top Forex brokers will have the best customer service to deal with their clients’ problems. When considering customer service, the first thing you need to take note of is the average time it takes to receive a response from them. We prefer on-site chat functionality as opposed to email because responses tend to be faster. If a broker is not offering chat functionality, it would be so unfortunate. Most people use email as a second alternative. They must also have an open phone line where you can call 24/7 to have your queries or issues sorted out. Some brokers will have their customer service operating 24/7. Others will restrict it to 24/5. Still, some brokers will have different levels of customer service based on the client account you hold with them. For instance, if you have a Micro account, you might get 24/5 customer service as opposed to someone who has a Mini or ECN account who gets 24/7 support.
Trading platform offered
This is the most important factor to consider when you are finished with the above. So far, the most popular trading platforms are MetaTrader , cTrader and FOREXTrader PRO.
For some reasons, many traders will go for the popular MetaTrader platform because of its popularity and simplicity. Some traders also have the knowledge to customize it according to their trading styles.
MetaTrader is user-friendly, thought it still lacks certain functionalities out of the box. For instance, you cannot reverse trade positions from sell to buy or vice versa.
On the other hand, cTrader does offer lots of features which can enhance your trading experience. Right from technical analysis instruments, to multiple currency pairs and the ability to reverse trades, it’s all there. Make sure you familiarize yourself with the interface first, then you’ll be fine.
Where as FOREXTrader PRO platform is a web based trading platform which is fully customizable. The platform is designed specifically for trading forex and features a wide array of advanced trading tools such as pattern recognition software, signal and an advanced charting package
So much has been said about finding the best Forex Broker. But the details given here are the most important to follow. Therefore, if you want to ensure that you are only working with the top Forex Broker, make sure they have all the features and requirements needed to make you comfortable while trading. That’s it!