Trading currencies for a living is becoming increasingly more popular in the world now that many investors are abandoning traditional financial trading instruments and concentrating solely on Forex. Just as accordingly, new brokers spring up almost daily, luring ill-prepared traders with massive, shining banners to join their trading platforms. However, before entrusting one red cent with any online broker you happen to stumble upon, it’s best to handle your due diligence with some thorough research first.
The internet is loaded with grifters, and online Forex trading is no exception. However, if you do find a great broker, you can be sure your money is safe. Therefore, landing yourself a top-rated Forex firm will help protect your trades. In addition, a highly ranked brokerage will often give you all the necessary tools and information on how to best engage the foreign exchange. Since Forex trading is considered to be a risky business, this information will help prevent bad trading decisions and huge losses.
Some important tips to consider when hunting down the best Forex brokers:
- Look at the type of services offered. Since engaging in the business of trading currencies over the internet does not require you to physically walk into your broker’s office, you’re best off selecting a Forex firm that will not hesitate to address any problems you may be having. The support staffs of the best Forex brokers are often easily accessible around-the-clock via phone, mail, or live chat. This means you should avoid brokers that don’t offer this crucial provision. You can normally determine your chosen broker’s quality of service through the reviews and testimonials of others who have used them.
- They should be registered with a regulating authority. To protect traders from being cheated, several financial regulatory bodies have been set up to monitor the behavior of Forex brokers over the internet. The two most common are the U.S. Commodity Futures Trading Commission (CFTC) and the Financial Services Authority (FSA). If any broker has not gone through the thorough registration process provided by one, or both, of these agencies, then it should be avoided. Good Forex brokers will enhance their reputation by ensuring certification through any local financial governing authority.
- Great brokers often provide different account types for their clients. If you truly want to pursue a career in Forex trading, it’s important that you choose an account type that best fits your background and style of trading. The best Forex brokers in the world usually provide you with the option of selecting an account type that adequately addresses your needs. Even if the broker has only one type of account, it should be designed in a way to where you can modify it based on your trading preferences.
- Look at the number of tradable instruments the broker provides. Top rated Forex brokers often have various tradable instruments that you can choose for trading. This enables you to practice diversification of your investment, particularly during the proverbial “rainy days” when some of your investments are failing to meet expectation. You should also avoid investing your money with brokers that provide only one tradable instrument, or some few others. On top of currencies, high ranked Forex brokers provide other tradable instruments such as commodities (crude oil, metals, etc), Contracts for Differences (CFDs), stocks, and so on.
- Quality Forex brokers often have competitive spreads in the market. Spread (the difference between bid and ask price) is important in Forex trading since you pay this fee each time you execute a trade through your trading platform. Spreads are either fixed or variable. The former remains the same regardless of what’s going on in the market, while the latter changes depending on the market’s activity. You should avoid enlisting the services of a broker with a high spread, as this will only increase your costs of entering trades.
- The best Forex platforms offer a demo (practice) account: Before you jump into the currencies trade, you should test your trading strategy through a demo account. Since it gives the actual market conditions, this account is important for boosting your confidence and perfecting your skills before venturing onward into the business of trading Forex. The best Forex brokers provide these demo accounts for free. You should avoid brokers that don’t provide this essential tool, particularly if you are a novice trader.