Three Top Tips for Choosing a Forex Broker
When you trade forex, one of the keys to being successful is finding the right broker. This is no easy task; there are thousands of these entities available, ranging from those who offer a gold standard service to those who should be avoided at all costs. Even amongst reputable brokers, you’ll find that there are those who simply don’t suit your trading style, risk threshold and goals, as well as those who are a perfect match.
But how exactly do you sort the wheat from the chaff? Here are three top tips to help you narrow them down…
One of the most important considerations is whether a broker will complement your approach to risk, so begin byconsidering the leverageyou’re being offered. Start by thinking about how high risk you want your strategy to be: the more you risk, the greater the profits you could pull in, but the more likely you are to suffer catastrophic losses. The higher the leverage you’re offered, the more risk you run, so you really need to contemplate how the figures you’re quoted suit your strategy. If, for example, you’re offered leverage of 200:1, would you be willing to run the risk of losing $200,000 when you’d only invested $1,000? Equally, would you prefer to minimise your potential for profit by accepting a more conservative offer?
#2: Currency Pairs
There are a lot of currency pairs to choose from, each with their individual risk factors, popularity and liquidity. Certain pairs will suit different strategies to varying degrees, so it’s important that you find a pairing that complements your goals. The most popular combinations are the US dollar/Japanese yen, Euro/US dollar, US dollar/Swiss franc and the British pound/US dollar. Almost every broker will offer these pairs, but if you’re looking for a less popular duo, then you might have to search a little harder. The important thing is not to choose your pair/pairs based on the broker you select, but to select your broker based on the pairs they offer.
#3: Trading Platform
The trading platform that your broker offers will be your portal to the markets, so it’s vital that you’re happy using it to trade. Many brokers will offer a demo account to allow you to get to grips with their platform before committing fully, and you should take full advantage of this. If you do, take your time to assess key factors such as how easy the platform and any associated software are to use, the aesthetics, the tools on offer, and ease of entry into and exit from trades.
If you find a broker who ticks all of these boxes, then they might just be the one for you.