Since the foreign exchange market is decentralized, meaning that there is no central governing body that runs the market, every single transaction and exchange is done through brokers or brokerage firms. The foreign exchange market is constantly growing and new brokerage firms are opening on a daily basis. The increasing number of brokers gives every trader the ability to choose which brokerage firm they wish to conduct their business through. Of course, the brokerage firms are competing with each other, providing different services to the future customers and offering them various benefits if they decide to continue trading with them.
If you are just starting out with trading on the foreign exchange market, you will be choosing your brokerage firm very soon. There are many options out there and you will have to decide which broker suits your needs the best. This article will serve you as a guide and it will point you out some key features you should pay attention to during your research of brokerage firms and what to be wary of. Just like in every line of work, you might encounter some brokerage firms which are not trustworthy and it really important that you are capable of identifying and staying away from them.
Surely, every brokerage firm has to start somewhere and you shouldn’t cross off the new brokerage firms right away, but always take a look at the date when the firm was established. If they are providing services to forex traders for a long time, that speaks a lot about their professionalism and success in general. The brokerage firms whose only goal is to fraud prospective traders usually do not last long and they are closed very quickly. If the firm is older than one year, it means that they remained in business and that investors are choosing it for conducting the trading business.
It might sound silly to pay attention to the location of the brokerage firm since all exchanges are done online, but it is of great importance nevertheless. Different countries around the world have different laws when it comes to trading on the foreign exchange market and it is advised to choose a brokerage firm which is located in a country that has strong regulations in case something goes wrong regarding the brokerage firm you are using. A trader has the ability to file a complaint or to contact the authorities and their rights will be protected. This level of safety for traders is not available in every country so make sure you know the exact physical location of the brokerage firm and the rules and regulations which are installed in order to protect a trader.
The brokerage firm should also set their own regulations outside of the official government in order to keep the safety of their clients when they are trading with them. The brokers should also be registered and given a permit to run their business. Every brokerage firm that is serious about their work should have that information available on their official website and anyone should be able to see it. It is most commonly located in the section of the website which describes the firm and gives the details about their history and the way they operate.
Brokerage firms offer their own trading platforms and traders should take a closer look at them as well. A trading platform should be easy to use and provide a trader with the easy access to the charts and any other tool for analysis they want to use while trading. The design should be pleasing but not too complicated and the most important buttons which are ‘buy’ and ‘sell’ should be clearly visible. Some traders might also be interested in customizing the trading platforms, meaning that they have the ability to pick and choose the information they want to receive. Filtering the news is another great option especially if a trader wants to use the trading platform for the fundamental analysis as well.
The best way to see if a trading platform suits you is to open a demo account. Most brokerage firms offer this option for free and you can use it regardless of your previous experience on the foreign exchange market. The demo accounts are a great way to learn about trading on the forex market but they are also useful if you want to test out the trading platform as well.
A number of brokerage firms also have mobile applications for iPads, iPhones, or Android devices available for their clients. These applications are often free of charge once you register with a firm and open your trading account. Using a mobile application can make trading a lot easier if you are away from your computer for longer periods of time, granting you the access to your account whenever you wish to do so.
It has already been mentioned that the brokerage firms are competing amongst themselves when it comes to different offers they have for the future users and that information can be very valuable when opening a trading account. You should look into standard and micro accounts, depending on the amount of money you wish to invest in trading on the foreign exchange market. Standard accounts are more suitable for professional traders who are ready to invest a significant amount of money, while micro accounts are appropriate for the novice traders who are just starting out on their trading journey. The minimum deposit or the amount of money you need in order to open an account varies depending on the brokerage firm. If you want to start with the standard account, you need to have at least $1000 as your deposit. On the other hand, micro account can be created with as little as $1.
Leverage is another thing you should learn about when searching for an ideal brokerage firm if you plan on using that option when trading on the market. Surely, leverage can be both good and bad and it is up to you to make a decision whether you are capable of making the best of it or not. You need to be aware of the risks which you might be facing when using the leverage. Some brokerage firms offer higher leverages for all of their clients, not only for the standard accounts, so if you want to take an advantage of that offer, you should find a broker that provides the leverage you want to use.
A brokerage firm should be available for their customers around the clock since many of their clients live in different time zones and trading on the foreign exchange market happens twenty-four hours a day. Some offer live chats while others have telephone lines reserved especially for serving the customers and helping them out if they have any trouble with using the website or the trading platform they offer. Even if you are not experiencing any malfunctions, you should test it out and call the support just to see if they are truly available to you at any given time.
Of course, brokers are earning money from you whenever you use their services. It is not a large number and it goes unnoticed with some foreign exchange market traders but a brokerage firm should clearly state what the source of their income is. They most commonly make money from the difference between the bid and ask price and they only take a few pips. Some might even try and advertise themselves as a brokerage firm that takes absolutely no commissions, but they earn money from wide spreads. Overall, the firm should tell you what they are charging you for since every customer has a right to know that information. Look around a brokerage firm’s website and you should find that data if the firm is respectable and serious about their business. A broker should be transparent and provide you with every detail you want to know.
Choosing a right brokerage firm is a difficult task for some forex traders because they are eager to start trading right away, but it is of paramount importance to take your time and find the right broker. Always keep in mind that the brokerage firm you select will be the place you visit on a daily basis and they will provide you with their services in every trade you make on the foreign exchange market.
Doing a proper research into these firms can help you a lot in the long run and you shouldn’t take it lightly. Explore every option or service they offer and think about the way it might aid you when trading on the forex market. Traders sometimes overlook these details in favor of low prices the firm provides, but they are significant as well. After all, you are putting your money in their hands and since you have the option to pick and choose, take an advantage of that and find the right brokerage firm that suits your needs.