Every day, trillions of dollars change hands electronically between forex traders. In order to achieve this milestone, brokers play a crucial role in facilitating the execution of orders placed by their customers.
Some of these brokers are registered with true organizations or regulatory bodies such as the Commodities Futures Trading Commission (CFTC) while others are just a group of people that offer a large array of services to their customers such as fund management.
When it comes to trading forex, traders are faced with the task of choosing a broker to facilitate their transactions. This is not always an easy decision as most brokers offer very lucrative incentives to customers in a bid to widen their client base in one of the most competitive markets.
Therefore, in order to select the ideal broker for your trading account, there are key factors that traders should look for, which in many cases differ from one broker to another.
A demo account
While it may appear to be a general incentive among many forex brokers, a demo account is one of the most crucial items for traders looking for a new forex broker. This is because a demo account gives traders the opportunity to test the platform and practice on the various aspects of the broker before signing up for a live account.
In most cases, brokers advertise this platform as a starting point for new traders to test their trading skills, but it is also as crucial to experienced traders moving to a new broker and a new system. Traders need to test the speed of the system in executing trades, the available methods of placing trades, as well as the analysis tools and information boards that keep traders up to date with events happening in the global financial markets.
Every trader wants to know the cost of doing business with a particular broker. In forex, this cost comes in the form of commissions, but varies depending on the type of account a trader operates. For instance, in managed forex accounts brokers and dealers are likely to charge a commission based on a percentage of profits made, although some stick to a flat fee.
However, when it comes to traders operating their own individual accounts, commissions are implemented differently. The spread between the Bid and Ask quotes provides the commission to brokers. This means that whether you are making a profit or loss, forex brokers take their cut at the point where a trade is closed.
In this regard, some brokers offer very attractive spreads to their customers ranging from 1.5 pips to 3 pips on major currency pairs in most cases. There are also those who have very attractive plans that allow traders to place rule-based trades in advance without having to pay for the spread. They only pay for the spread when the transaction goes through after their target bid or ask price is reached depending on their placements.
Therefore, assessing the commission terms and policies of the forex broker is very crucial when choosing who to trade with.
After analyzing the companyâ€™s commission policy, as well as testing their platform using the demo account, you would need to fund your account before you can start live trading. Therefore, it is extremely important that the brokers you are looking for support various forms of payments that suit you needs.
For instance, in some countries banking rules have various restrictions to using certain methods of payments. In others, some of the methods provided by the broker may not be available. Some brokers offer a variety of methods, which include PayPal, Skrill, Credit/Debit Cards, and Wire Transfers among others. Another form of payment that is becoming more popular is Neteller.
Client support is one of the most essential aspects of any company. Service companies such as forex brokers know they must offer high quality client services to their customers in order to stay ahead of the competition.
Indeed, you should expect the best forex brokers to offer live 24-hour multilingual support, via phone, email and online chat clients, whenever the markets are open. That way you know you wonâ€™t be left with unresolved problems when you are trying to focus on trading.
These are not the only factors to look out for when selecting a forex broker, but in my opinion they are the most essential aspects that define who the best forex brokers are relative to client needs and priorities.