Security and Regulations
To protect your hard-earned money, you should only trade with forex brokers you can trust. You should avoid unregulated brokers at all cost and investigate under which authority your broker is regulated (and confirm that their license is valid).
The different regulating authorities enforce rules on their affiliated forex brokers that regulate aspects like the amount of leverage they may offer to their clients and which measures they should take to protect their client’s deposits and profits from trading. Click here to read more about forex broker regulations.
Forex Broker Types
Are you aware that there are different types of forex brokers? Not all brokers execute their clients’ trades in the same way. Functions like the spread, commissions, rollover fees, liquidity, re-quotes, slippage, reliability of execution, and many other factors, are influenced by the type of forex broker you use.
If you’re having a hard time sifting out the best forex brokers of this time, this guide is a must-read to educate you about the three main broker types and how they could influence your trading success in the forex market. To read more about forex broker types, just click here.
Trading platforms are also important. We used the Metatrader 4 or Metatrader 5 platforms at some point during our trading years and almost all forex brokers offer it. However, if you want more, there are plenty of brokers who offer their own trading platforms. Some of the platforms are confusing but some are surprisingly good. I won't mention them all though you should check out our new featured forex brokers list above and read about their trading platforms.
Costs are very important to anyone, as a result, spreads must be as small as possible in order for a forex broker to be considered a good, especially if you like to trade short term signals. In addition, there are other fees, such as deposit/withdrawal fees, dormant account charges, etc. Pay attention to dormant account penalties as well. Make sure to check all types of fees before opening an account with any broker.
A trader must also test the broker's customer support. Sometime, a small issue can turn into a big nightmare if the customer support is not helpful. Other features which may be appealing are bonuses, rebates, promotions, trainings and webinars. They're not extremely important, in my opinion, but might be very appealing to others. You should take them into account if they are important to you.
Of course, you have to find a forex broker which suits your trading style. If you are a scalper or use a scalping strategy and your broker does not allow scalping or discourages playing with all sorts of tricks, you can't trade with them regardless of how reliable they are in other aspects. Every forex trader has his own trading style, so there's no single rule to follow. The only advice we can give is to try your strategy with them for a while and if their services match your need, go with them!
Spread and Commission
A forex broker’s spread and commission structure is an extremely important consideration when doing a forex brokers comparison.
First of all, a wider spread makes it more difficult to execute profitable trades because the price needs to cover a greater distance to your take profit. It also increases your risk of losing trades because the price is automatically closer to your stop loss.
Besides these trade hurdles, higher commissions, wider spreads, expensive rollover fees, and additional fees will eat away a substantial part of your forex trading profits in the long run. Make sure you do your homework on this topic properly! To find out more about forex broker spreads and commissions, just click here.
Social Forex Brokers
For investors who don’t like to do all the forex trading and forex market analysis themselves, there is an exciting way to access this massive market (and a wide range of other markets) in a really efficient way.
With the help of social trading and copy trading brokers, the amazing concept of copying profitable traders is made incredibly simple and easy on their platforms.
That’s not the only function of these brokers, however. If you have what it takes to trade the markets responsibly and profitably, you can earn money on their platforms as a ‘popular investor’. Your trades will be copied to the investors’ accounts who choose to copy you. The social forex broker will then pay you a commission according to the number of traders copying you, and/or the amount of money you manage in this way. To learn more about the exciting opportunities offered by social forex brokers, just follow this link.
Customer Support - Practical ways to evaluate your broker’s performance
I personally trade with a couple of different forex brokers because of fund management requirements. A few years ago, I tried to place two market orders with one of these brokers, on the EUR/JPY currency pair, which weren’t executed. When I contacted my personal account manager, he said he would have the issue investigated and get back to me.
The trades which weren’t executed would have made a profit and the broker calculated how much the profit would have been by looking at where my take profit order was supposed to be. The broker credited my trading account with this amount and said they were glad to perform a once-off compensation for the ‘loss of potential profits’. It was a once-off deal because they do not usually compensate for the loss of potential gains when it comes to order execution errors.
I was utterly amazed at the generosity of this broker, as the authorized manager went out of his way to do more than which was necessary to keep me happy. I didn’t expect from them to do the restitution, but they were happy to do it anyway. That’s amazing!
There are a few ways you can test the reliability of your broker with regards to customer service. Customer service is really important when you encounter serious problems with, for example, the platform you’re trading on. When you’re in such a situation, the speed at which the technical team solves the issue can determine whether you lose or make money.
For example, I had a charting issue with the same outstanding forex broker that was so generous to reimburse me for their execution errors. The issue was that the charts didn’t load when I launched the platform. Now to me, this is a massive problem. I don’t know about you, but I can’t trade without seeing charts in front of me.
Anyway, this was a really difficult problem for them to solve, but they got it right in the end. Problems like this can easily rob you of a profitable day’s trading. When things like this happen, the degree of support you get from your broker is absolutely critical.
How to gauge your broker’s responsiveness
1. Ask them for help with a few things, like for example, retrieving a lost password and username. Then take note of how long it takes them to assist you and sort out the problem.
2. First, deposit a small amount of money into your trading account. Request a withdrawal after a few days to see whether it is done as fast as the broker promised to do it. This will also give you the assurance that the forex broker actually allows clients to withdraw their funds (scamers often steal their client’s deposits).
3. Ask your broker to assist you with tasks like importing custom indicators, setting up charts, or running an account statement. Contact them via email and via their online ‘live chat’ function if they have such a service. If you see that you need to wait very long for assistance or if the representative doesn’t have the ability to help you properly, you definitely need to take note of these weaknesses.
4. Pay attention to how effective the broker’s communication is with its clients. For example, if they regularly notify their clients of important events or changes on their forex trading platforms. These events can include irregular trading hours due to holidays or changes in margin requirements, for example.
There are many other ways to evaluate your broker’s customer service, but taking some of these steps is a good place to start.