In order to participate in the currency markets, a trader can only get market access by using the services of a forex broker. Forex brokers are the gateway through which traders can use the online trading platforms in order to trade currencies. It is the forex brokers who domicile your trading funds, provide you market access through the trading platforms, provide you with market updates, data feeds, price quotes, the news calendars and in some cases, market analysis.
Success in forex trading will, therefore, depend on taking this very critical factor seriously. It is, therefore, a thing of amazement to see the manner in which so many would-be forex traders treat this with levity.
A visit to the search engines will throw up literally thousands of forex broker websites. These range from solid brokerages operated by banks and financial institutions with structures, great capitalization, and quality services, to the scam ones some of which are operated by one or two persons from a two-bedroom apartment.
They all have one thing in common; great sales pitches and fantastic web designs that are so visually appealing, a trader will almost see himself milking dollars from the market the next day. This can make the job of broker selection a very difficult one for the newbie trader. Brokers have even upped the tempo of the game by introducing all manner of bonuses and value-added services, all in a quest to capture the trader and his funds.
To avoid a lot of sleepless nights, the trader needs to be genuinely concerned about selecting a good forex broker to ensure primarily the safety of funds, and a good trading experience as a secondary option.
So how do you separate the wheat from the chaff as far as brokers are concerned?
If there is any factor that should be considered the no.1 criterion, it is this. Safety of your trading funds is only guaranteed when a broker is regulated. There is no short cut to this. Regulatory agencies differ from country to country. From the National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC) in the USA, to the Financial Services Authority (FSA) in the UK, and to the regulators in the European Union who are signatories to the MiFID regulatory protocol, there are regulators that cover the financial centers of the world.
If a broker is not regulated, do not put your money there. Someone I know recently had his account summarily closed and his funds seized by broker located in Seychelles for a very ambiguous reason. There have been lots of complaints against this “broker”, but with people being enticed by their 100% bonus offer, most traders who have had tales of woe have never really checked the regulatory status of this firm. FPA’s website is filled with stories of brokers who have disappeared with people’s money. You do not want this to happen to you.
2) Customer service
The currency market is a 24 hour market and any brokerage firm worth its salt should be available for customers at least 18 hours of the day. A 24-hour coverage is preferable to cater for all time zones.
3) Market Access
A lot more is demanded from brokers these days, so choose a broker that provides a user-friendly trading platform such as the MetaTrader4, along with value-added services like interactive charts, news feeds, technical analysis and a squawk box.
Membership of a forex online forum is a must-have for every forex trader. Why? Because that is where you can get ready access to information about the reputation of just about any broker you can think. On these forums, the good, the bad and the downright ugly are all there for you to see and choose accordingly. The reviews are done by real, everyday people who have tested these brokers in several areas. As such, online forex forums are a good barometer of broker reputation.
With your funds at stake, it is simple common sense to use these parameters to do some due diligence on a broker before you take the plunge.