The process of finding the best broker for your trading can sometimes be daunting. The complexity relies on the number of points to take into account and the fact that requires a certain amount awaraness to chose the adequate company to trade with. As our Content Advisor, Gonçalo Moreira, explains, “it is not possible to speak of a broker who is perfect for all kinds of traders. Instead, you should carefully consider your own expectations from trading, and compare that with what is offered by the broker, and choose the one that is best suited to your needs”. Being aware of this complexity, we’ve prepared a set of posts whose aim are to offer some tips to our audience to be taken into account when choosing a broker.
No matter which Forex broker you are evaluating, there are basic factors to consider:
- Identify your Forex trading priorities.
- Conduct a thorough research of brokers (the most tedious part).
- Select a broker that is strong in the areas that appealed the most to you in step 1.
Common mistakes
The most common mistakes that we make when choosing a broker are procrastinating the decision or selecting a broker too quickly. According to Moreira, we typically feel so attracted by the potential returns some people have made trading currencies that we skip the broker selection stage, to get on with real trading. And he warns: “without knowing anything about your trading skills I can almost guarantee that your initial deposit – whether it was $50 or $50,000 – it will be lost in the near future. Not because you skiped the broker selection process itself, but because the selection process requires you to define your trading style and its specific requirements”.
The new trader is probably not ready for trading if he doesn’t know how many pairs he will trade; if his position management may be affected or not by FIFO rules; if because of his trade frequency and style results are sensitive to spreads or not, etc etc.
He recommends you to take it easy and be methodical to do things correctly. The Forex market is not going away tomorrow.
This article is based on the Webinar: The process of chosing a Broker, made by Gonçalo Moreira held on July, 9th.
The problem with choosing a broker is not defining your style, but finding a broker that is honest, safe and secure. THe only review site i have found is forex peace army and there are horrid reviews for almost every broker, and the biggest problem is clients being unable to withdraw funds. I know that it is not fx streets job to screen brokers, but that is what is needed, a broker screening site, to insure honesty in the sector and to push the dishonest broker out of business.
We see your point but it it’s on the regulator’s hands to surveil the market. From those complains we receive about broker behavior, many (if not most) are a misunderstanding of the business conditions. For instance, if you want to hedge your orders, make sure you select the broker/account with that functionality. For news traders, perhaps a broker with fixed spreads will provide a lower cost compared to another broker offering very low but flexible spreads.
Rest assure that a broker with negative reviews on the the withdrawal process has to make huge efforts to reconquer the costumers trust. The claims from costumers have to be well understood, like the use of margin and leverage, the way stop orders are triggered, implicit costs such as slippage… It’s also important to follow the brokers explanation. If there is no answer to the claim, that’s a bad sign. But in most cases brokers have dedicated personnel to deal with all cases.
We recommend traders to call their broker, speak to someone in their offices for a few times, try to find someone inside the company who can help them in situations of discomfort. Don’t open an account strait away, take your time to find your partner.
If you want to FX trade, do it seriously. Go with an ECN broker who will take its profit from a clear, predefined, commission. All these FX brokers who advertise their “tight spread”, “high leverage”, “automated strategy” and “best platform ever” (Oanda, Alpari, FXCM etc) make me feel sick.
Think about it for a moment and you soon realise that only long term trading with a transparent broker allows reliable and profitable trading.
Oanda etc want new customers, i.e. customers who loose their margins. An ECN broker wants to make deals with you.
Just an advice from a trader.