Choosing the best
If you’ve read all the previous chapters, you should be pretty familiar with the major aspects of how Forex Brokers operate. So now it’s time to ask the most important question of all: how do I choose the best Forex Broker of them all? Let’s find out!
In previous chapters, we have introduced you to a wide range of criteria by which to pick the right Forex broker for you. However, as you might’ve guessed, not all criteria have the same importance when choosing your broker.
In a perfect world, full of perfect brokers, you wouldn’t have to choose, but chances are that you are going to make some compromises when making your choice. To do that you need to have a clear order of priorities. So here is a list of our picks for the 10 most important characteristics a great Forex broker should have, by order of priority.
1. Regulation, regulation, regulation
It should come as no surprise that the most important quality a Forex broker should have is ethical business behavior and fair treatment of clients and their funds. In all fairness, there is nothing to prevent a non-regulated broker from acting ethically and responsibly towards clients; however, there is also nothing to guarantee it. That is why it is paramount to trade only with licensed and regulated brokers.
We find that European regulators have the right combination of client protection and broker flexibility, so picking a broker regulated in the EU is a safe bet. For more information check out our chapter on Licensing and Regulation
2. Suitable broker type
As we’ve discussed in Chapter 2, every broker type has advantages and disadvantages, and when picking a broker it is essential that they operate in a manner that suits your trading style.
To put it succinctly, if you are a scalper, a day trader, or a trader who prefers capitalizing on short-term swings, as opposed to holding out for longer-term trends, then Market Makers are probably the best fit for you due to their fixed spreads and fast executions that guarantee no slippage.
If you’re a long term trader who has the capital to open sizeable currency positions, then an STP or ECN broker would be more suitable to your needs, as you may find the much larger liquidity and tight spreads a more advantageous offer.
3. Easy to use platform with good charts
Having a platform that you are comfortable with makes it easier for you to capitalize on market opportunities, no matter what kind of trader you are.
“Easy to use” is of course a relative term: some of you may find the advanced MT4 platform easy to navigate, while to others it might look like an impenetrable jungle of graphs and figures.
Whatever platform you settle on, make sure it has a good charting suite. Even if you currently only have the most basic charting skills, as you gain experience you will want a charting software that will let you spread your wings. For more information see our chapter on Trading Platforms.
4. Great customer service
Customer service is one of those things that you hope to never need, but if you do end up needing it, the service you get can make a huge difference... not just to your general customer experience but also to your balance!
Make sure that your broker’s customer service has numerous channels through which they can be contacted, that they are available throughout market hours, and that they are able to care for your needs in a language you’re comfortable speaking.
5. Reasonable fees
As with any service, you want to get the most bang for your buck, so considering how much a broker charges for each trade is only natural. Whether your broker works on spreads or commissions, you can refer to Chapter 5 for our list of what we consider reasonable fees for some of the most popular instruments. If your broker charges commissions in addition to spreads, simply count the two together to see if the end price is reasonable or not.
Don’t get freaked out by overnight rollovers – this is a standard fee and sometimes the difference in swap interest rates can actually go in your favor. But do watch out for extra hidden fees such as “account inactivity” fees, or exorbitant withdrawal fees.
6. Wide instrument selection
Even if Forex is your main game, it’s always a good idea to have options to expand into other assets in order to diversify your portfolio.
Commodities such as Gold, Silver, Oil and Gas have become pretty standard fare for Forex Brokers, but you can do even better with a broker that offers stock indices (eg. NASDAQ, Dow Jones, S&P500) or stock CFDs.
7. Flexible trading options
Trading options often depend on the type of broker you’re trading with and the regulations they are obliged to uphold, but you can still find a lot of variance among brokers who are similarly stacked on these two criteria.
The most important options to have is flexible leverage (dependent on your risk appetite, but you should at least be able to trade with 1 x 100 leverage), and flexible stops, meaning that you can edit your Stop Loss and Take Profit orders even after opening the trade.
8. Demo mode
Practice makes perfect, and there’s nothing like a demo mode to enable you to test out new skills and strategies.
Make sure that you have unlimited “virtual money” (or however your broker may call it) and that you get live market rates in demo, otherwise your practice won’t have much application in the real world of financial markets.
9. Account manager
Having an account manager who is personally in charge of monitoring your activity, giving you suggestions and steering you towards market opportunities is a huge plus.
While this is a service many brokers offer only to their larger clients, it doesn’t hurt to get in touch and ask about getting your own account manager even if you don’t have thousands of dollars to invest in Forex.
10. Mobile app
Finally, in a world where over 25% of traders manage their trades exclusively on smartphones and tablets, having the option of trading on the go is simply a must.
Make sure that your broker’s mobile trading app is free of charge, and secondly that it delivers in terms of the essential functionalities that you need in order to open, close and edit trades, including charts and streaming news.
With all this in mind, you’re ready to choose the best Forex broker for you. To do so, you can both compile your own list of brokers and check off the desired parameters for each, or you can use any of a number of websites that rank brokers for you.
The advantage of using a website with brokers review is that all of the hard work is done for you, and if you’re not an expert trader, getting an expert opinion might not be such a bad idea.
Broker reviews, such as the one on our website, will not only give you detailed lists of the broker’s services, tools and features, but also rank them according to trader experience and show you the percentage of traders who choose each broker, so you can see for yourself how popular each broker is.
Reminder! There’s no need to wait for a time when you really need support to contact your broker’s customer service. In fact it’s better to contact them before signing up to see what kind of service you can recieve.
Check out the broker’s
In a world with online forums, bad brokers have nowhere to hide. Before signing up with a broker, check out a Forex forum or two, such as the Forex Peace Army, to see what your fellow traders say about them.
And the Award goes to…
Like any industry, Forex brokers like to pat themselves on the back by giving out various industry awards: best broker, most innovative broker, best platform, you name it!
So why settle for the rest when you can have the best? Check out your broker’s industry awards online or on their website to see how they stack up.