In the 1970s, the Forex market or currency market was created, and in recent years it has experienced strong growth thanks to the Internet and new technologies. Some studies indicate that there are daily transactions in the Forex market for a value of 4 trillion dollars (the New York Stock Exchange moves 50 times less daily).
In addition, individual investors and traders have snowballed, thus constituting one more participant, albeit a tiny one compared to the central, commercial, and investment banks. With this remarkable growth in the foreign exchange market, new Forex investment brokers have emerged with the aim of attracting retail investors. There are so many brokers on offer that one can be lost when choosing a good one.
Recommendations and tips for choosing a good Forex broker
A broker is a financial intermediary in our operations. That is, it is the intermediary between buyers and sellers.
It seems obvious, but that is not why we should stop highlighting it in the first place. And how do you know if it is solid and respectable? For this, we must look for a broker with a lot of net worth because of the more significant the firm’s capital, the greater the protection of its funds.
To determine the vitality of a broker, you must look at the number of employees on the payroll. If it is a solid and reputable organization, it will have hundreds of employees who can help you 24 hours a day.
Also, they have hundreds of thousands of accounts. If the firm has few employees, it is likely they have little capital or cannot provide you with the personal assistance you need.
We must also take into account which guarantees fund supports it since this is in charge of protecting your money in case the broker goes bankrupt.
In short, a solid and reputable broker must also be authenticated; and comply with a series of regulations. For example, within the extensive regulations developed by the European Securities and Markets Authority (ESMA), some aspects have been included that try to protect the small investor.
Find a regulated broker
It must be taken into account that the broker is regulated by a competent entity such as NFA (United States), FCA (United Kingdom), or FINMA (Switzerland), among others. You have to avoid all those brokers that are in tax havens.
Brokers in Europe, Canada, Hong Kong, and Australia have adequate regulations and high capital requirements. Current regulations may need to be revised if your company is located in an underdeveloped country.
In any case, we recommend you be careful with clone firms, which are companies or brokers that pose as authorized brokers, many of which use a similar name and even the same brand image and authentic web pages. For this reason, we advise you to do an arduous search for the broker to avoid possible deception.
Ensure the broker can provide higher leverage
Leverage can help you make considerable profits but also cause huge losses. It is recommended that a broker provides you with leverage so that, in this way, you can operate effectively in the foreign exchange market.
Naturally, higher leverage means better opportunities for you. Some brokers offer 100:1 leverage, which means that for every dollar in your account, up to €100 can be borrowed and used. Other brokers offer up to 250:1. When choosing a Forex broker, you have to take into account the leverage it offers since this could be your great ally.
Try a free demo account
It is recommended that the broker has a free demo account that operates in real-time because it allows you to practice and learn with real or fictitious money the features and services of the broker you want to contract before opening a real account and starting trading on it.
With a demo account, you will be able to immerse yourself in the Forex market without the risk of starting by investing your assets: this way, you will be able to carry out the first operations and have a more global vision of this market before investing.
Avoid so-called Snipers or Hunters brokers
These brokers usually buy or sell based on pre-established points. They usually carry out these maneuvers to increase their profits. Avoid these types of runners. To find out who these brokers are, you must communicate and interact with other traders online or through forums.
Check the speed of the autorun
One of the most critical variables to consider when choosing a broker is the speed of the executions. The best thing is that the execution is automatic, so the broker typically respects it when we want to enter or exit the market at a specific price.
Do not pay commissions for spot
Forex traders do not pay commissions for placing orders, unlike those who trade futures markets. A Forex broker is a simple intermediary and not an agent. Therefore they obtain benefits through the spread; this is the difference between the value of the “bid” and the “ask”.
Remember that the market maker or market creator covers the position with other operations or does not cover it so that it assumes the risk opposite to yours. In other words, if you win, the market maker loses, which creates a conflict of interest.
Customer service is essential
Customer service is essential because it will help you solve any possible incidents you may have. It is advisable to look for a broker that solves them as quickly as possible, does not hinder the withdrawal of funds, and only has a few complaints from other investors. To find out other investors’ opinions about the brokers on the market, you can consult and participate in stock market forums.
In other words, a broker must be very kind to clients, as well as proactive and helpful, always showing all the information and offering a good service. Well, no matter how regulated the broker is and has very cheap commissions, if it has a disastrous human team, it is useless if there is no solution to the problems presented.
Avoid welcome gifts
Avoid all those brokers that offer welcome gifts, such as 30% welcome bonuses or Ipad-type gifts. In most cases, if you stop to read the fine print of the conditions, you realize that to withdraw the bonuses or the money itself, it is more likely that you will end up losing all the money deposited beforehand.
Remember that if you want to withdraw your money and do not meet the conditions to do so (almost always), the bonus received or the amount of the gift made will be deducted from your account.
Training service
Recently, many brokers have offered training services, so we recommend that you choose a broker that provides quality training services. Training can be biased and with learning methods based on the broker’s interest. So choosing a broker that offers a complete training service with quality teaching will be very useful to you.
Broker fees and commissions
When choosing a broker, you must also review the fees and commissions charged, for this keep in mind the following concepts:
Spread the difference between the purchase price and the sale price. That is the ask and the bid.
- Buying and selling or intermediation commissions: fees set by each broker vary depending on the type of asset and instrument traded.
- Custody fees: account maintenance fees.
- Commissions for additional services: the transfer of the securities portfolio, processing of dividends, collection for withdrawals or deposits, processing of coupons, contracting of real-time quotes, and overdraft commissions, among others, are included here.
