Although I was not a Forex newbie I had many issues with the brokers I was using and had used in the past. Bad fills or the inability to withdraw funds from accounts I had made money in, were just two issues that arose.
Ultimately, these issues could have been avoided had I simply been given a guide on choosing my broker as a newbie. Hence I decided to put my thoughts down in “Newbie’s Guide to Picking a Broker”.
Wherever we look we are bombarded with adverts proclaiming we can make money trading forex (FX). It would appear that the number of FX brokers is increasing and this means we should be extra vigilant with regards to where we place our money.
Simply picking a broker by the offer of a free IPad or IPhone is naÃ¯ve as over time you will have paid for this item several times over.
In this guide I set out to give you 7 points to follow. These points can be categorized into two key areas, Research and Comparison, then when you have a short list of the brokers you want to use, follow the third point. It’s that simple.
1. Are they regulated?
One of the key points you need to establish when looking for a broker is whether or not they are they regulated. This is a simple question and the answer should be “yes”. Any form of regulation is better than none.
2. Does the brokerage allow all trading styles?
Some brokers frown upon scalping whilst others increase the spreads during new releases. The way you trade needs to be in line with the brokerage house rules. Make sure your trading style fits with the brokerage house.
3. Does the brokerage have a dealing desk?
If they do they will be trading against you. Fundamentally there is a conflict of interest and they will ironically want you o lose. This is one of the key points. Do you really wan to be competing against your broker.
4. Does the broker offer research services and if so do you have to pay them an additional fee to access them?
A good broker will offer additional services such as news feeds etc. These should be added value products that differentiate them from their competitors. Find out what the broker offers.
5. Does the broker have positive/negative feedback?
The internet is a wonderful voice for buyers of products and services. There are numerous reviews web sites which carry genuine reviews from past or current users.
These websites should be used as a key research tool. Look into the activities of the brokers you are considering using and note anything that stands out.
The first five points are really elements of research. These are essential to you creating a short list of brokers that have the key characteristics you are looking for. Once you have this short list you should go onto point 6.
6. On completing the short list of brokers carry out a basic comparison of your chosen few
Put together a table highlighting the areas that are important to you and feed all the information you have collected into this table. The result will be that you can clearly see the brokers that stand out.
7. Before opening any trading account you should take the top couple of brokers and set up “demo accounts”
Whilst they will not give you the exact same conditions as a live account they will be pretty close and will give you an opportunity to test the brokers you have chosen.
I wouldn’t dwell on the demo account for too long. You will no quite early on whether the ones you have chosen are the brokers you can work with.
If they fall short simply move onto one of the others by again opening a demo account first and testing the platform, service and prices perform as you expect.
This is a process that might sound quite cumbersome but if followed will save you both time in searching for a change in broker at a later stage and more importantly save you money.
I hope that you have found this – all be it general – article on choosing a forex broker of interest.