There is no marketplace for foreign exchange trading, hence it is necessary for traders to use a broker to help them in their trades. There are many brokers in the market, but choosing the right one requires caution as it can become quite overwhelming to decide on the most suitable broker.
Compliance
The U.S. has regulatory compliance rules when it comes to forex brokers. A reputable broker will normally be a member of the NFA, which is the National Futures Association. The broker will also be registered with the CFTC, which is the Commodity Futures Trading Commission. You should check to see if the brokerage you are researching is indeed registered as a Retail Foreign Exchange Dealer and Futures Commission Merchant.
The NFA develops programs, services and rules to protect investors, traders and market integrity. The CFTC is a government agency that ensures the options and commodity markets are regulated. Their aim is to protect the public from abusive, manipulative and fraudulent activities.
Countries outside of the U.S. should have their own regulatory bodies and to protect your money you should only open accounts with brokers who are registered with these associations.
Trading Platform
The broker’s trading platform is your access to the market. You should ensure that the software and platform is simple to use and suits your trading style. It should offer you a range of analysis tools and various charts, graphs and reports. You should be able to enter and exit all your trades with ease. Important tools to look for in the trading platform are the ‘sell’ and ‘buy’ buttons. These should be in a prominent place, easily accessible and it would be better if the platform provided you with a ‘panic’ button which will close all your open positions. A trading platform with a badly designed interface could cause you to lose money unnecessarily.
Support and Service
As the forex market trades 24 hours a day, the customer support your broker offers should also be 24 hours. Most traders do everything online, but it is often a convenience to be able to speak to a live person at your brokerage. In times of high volatility in the market, you may want to place trades by using the telephone. During the process of assessing brokers, you should place a call to the brokerage as this will give you an idea as to the level of customer service they provide. The time it takes for them to answer the call and the ability of the representative to answer your questions efficiently will give you a good idea of the type of brokerage you may be dealing with.
Account types
Brokers offer different types of accounts and the level of margin and leverage differs considerably. You need to know exactly what you will be offered in this regard, as well as how they calculate their spreads and commissions. You need to know how much your initial deposit will have to be.
Prior to making a final decision on a brokerage, you should feel comfortable using their trading platform. The software should offer you all the tools you need to implement your strategy effectively. You should feel comfortable dealing with your broker.
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