Choosing the right Forex broker can be a difficult task. Many brokers are registered in unregulated countries. Other brokers charge too much for the spread. Worse of all is that some brokers are just plain scammers and you may never see your hard earned money again. What this means is that, regardless of how good your trading strategy is, a broker can greatly affect your profits and even your livelihood as a Forex trader.
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What follow are just a few guidelines to help you select the right broker.
- Is the broker regulated? In the US, all brokers must be registered and regulated and, furthermore, brokers that are not registered in the US cannot do business with traders from the US. Although I strongly disagree with this policy, I understand that this regulation is meant to protect traders from unscrupulous brokers. Bottom line, make sure that your broker is registered in a regulated country.
- Competitive Spreads: Forex brokers usually don’t charge a commission. Instead, broker charge you based on the spread. It is very important that you choose a reputable broker that charges very little for the spread. For example, eToro (a well recognized and reputable broker), charges 3 pips for the EUR/USD spread, where Avatrade charges .7 pips. Those charges add up and, over time, can mean that you overpaid thousands of pips by choosing the wrong broker.
- Re-quotes: If you place an order and get a popup message asking you if you want to proceed at a new price, this price change means that you were “requoted”. Although this may happen on occasion, some brokers make a living out of re-quoting and you should stay away from them. When selecting a Forex broker, make sure that they honor the quoted spread most of the time.
- Reputable: As mentioned before, a reputable broker won’t constantly requote your spread. More alarming are the brokers that won’t make your money available upon demand. What good do you get from a great strategy if you can’t get your money out? There a few scammers in the market portraying themselves as reputable broker and you should make sure that you stay away from them.
- Reachable: Make sure that your brokers customer support is reachable and responsive. Before opening an account, contact their customer support by both, email and phone, and see/test how responsive they are to your inquiries. If they are not responsive to get your business, you can expect even a worse service once they have you locked as a customer.
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These are just a few guidelines and you should make your due diligence. Although online reviews are great, you should also use caution when reading them because some of them are posted by the brokers themselves. I stayed away from a broker because of the wildly mixed reviews and the tone/wording of the good reviews which were obviously written by the same person. With all the bad said, I must say that there are many great brokers in the market, you should make sure you do business with one of them.
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