What should we consider when choosing the best Forex broker

What should we consider when choosing the best Forex broker

To choose the best broker, in fact, some elements must be examined, and above all, some basic questions must be asked, which cannot be overlooked. In the world of Forex, it is essential to know how to choose a Forex Broker with which to interface on the currency market.

The choice is not simple, given the large amount of operators on the market that offer different services with relative advantages and disadvantages. There are various factors to examine when choosing the Forex Broker, but the most important is certainly what concerns what we are looking for.

Some questions that can be asked when choosing a Forex Broker are, for example: is he a regulated Broker? And if so, where? How reliable is the trading platform? What is the added value of a particular broker?

Below, we will try to evaluate all the factors to consider that help you to recognize the right Forex broker.

The importance of a regulated broker

This is the first question that must be asked by any trader who is looking for a Forex Broker to trade Forex. In fact, not all countries regulate the market and the requirements to become a Broker in the same way.

It is necessary to know, in fact, which are the countries in which Brokers have strict regulations and close surveillance. It is also good to be careful to see where the location of a broker is based, as there are also offshore brokers operating in other countries. For example in Australia the regulator is ASIC. The States that have a supervisory body that regulates Broker requirements are as follows:

  • USA
  • UK
  • Eurozone
  • Japan
  • Switzerland

The reliability of the trading platform

This question is answered primarily in the convenience of the user in using a Forex Broker desktop application rather than a web platform via Java. Furthermore, it also depends on the characteristics of the software and hardware available to the user interested in understanding how to choose a Forex Broker.

The most important thing is to look for a platform that does not slow down, or that can face frequent systemic crashes, especially if the frequency of the user’s trading is rather high. Instead, for those with a rather slow trading frequency, the choice of the Forex Broker will prove more flexible and straightforward.

Regardless of the frequency of individual trading, it is essential to recognize which forex brokers are the best, who offer the highest number of operating options, such as real-time charts that allow comparisons with charts of other instruments or the possibility of placing orders at predetermined times or price levels.

The capitalization of the broker

It is needed to be able to understand the capitalization, that is, the economic solidity of the Forex Broker you are choosing. It is essential to know that regulated brokers must respect a minimum capitalization threshold information that helps the trader to understand the size of the Forex Broker. Consequently, its solidity is an excellent starting point to understand how to choose a Forex Broker.

The greater the capitalization, the more the Forex Broker will be reliable, vice versa, it is good to be wary of those Forex Brokers who do not disclose the company’s figures.

The quality of customer support

Customer support is a fundamental point in choosing the Forex Broker since Forex is a market open 24 hours a day, and consequently, a user may need support at any time of the day.

Another factor to watch out for Forex Broker customer support is to see if support is offered in the desired language and how you can contact customer support. In fact, there may be various types of support offered, such as support via email, phone, or live chat. Furthermore, it is good to understand whether customer support provides sudden and quality answers.

Now let’s move on to a very important element: the commissions and costs that are requested by the broker. One of the important aspects to evaluate is, in fact, the cost that the broker requires us for the operations we carry out through the platform.

Trading costs and commissions

In the Forex market, unlike other markets, Forex Brokers promise not to apply trade fees or regulatory fees or data fees. In reality, these are based on the number of trades or the performance of some statistics.

Basically, Forex Brokers use 3 types of commission structure:

  • fixed spreads,
  • variable spreads,
  • commissions based on a percentage of the spread.

Remember that the spread is the difference, calculated in pips, between the purchase price and the sale price.

You might think that the fixed spread is the best choice because you know what you are going to face once a trade has been concluded. However, it may be convenient to pay a variable commission if lower spreads are made.

First of all, we should consider that a high capitalization Forex Broker will surely have stronger relationships with banks and that, therefore, he manages to find the liquidity to be used by the trader in a simpler way. Furthermore, the impact of commissions must always be taken into account in trading strategies, which can vary precisely in proportion to the commissions required by the Forex Broker.

Some Forex Brokers do not require commissions on trades as their earnings are tied to the spreads generated. The lower the minimum spread to be achieved to avoid the commission, the greater the profit generated for the trader.

With variable spreads, you can run into the phenomenon of “requote.” It occurs when the broker has difficulty placing the order due to a lack of liquidity or an increase in volatility.

With the requote, you risk paying more pips than expected, since the placed order can be moved a few pips. This can be avoided with a fixed spread regime, which, although it generally costs more, prevents this type of frequent phenomenon, especially in very short-term trading or news trading. It is therefore good to ask the Forex Broker how it can behave in these circumstances or to choose those Forex Brokers that allow the use of both variable and fixed spreads.

Margin and leverage requirements

Some traders choose the Forex Broker based on the flexibility of the lever that the latter offers. However, it is good to remember that high leverage flexibility can lead to high profits as well as large losses. It should be carried in mind that some Forex Brokers tend to leave the lever fixed while others make it more flexible, depending on the exchange rate being traded.

The Forex Broker’s margin policies are divided into various types, there are companies that use the “Fifo” ( first in first out ) and “Lifo” ( last in first out ) method, which are procedures for closing trades once the liquidity requirements are not reached, or the trades are automatically closed if the minimum capital thresholds are not reached.

What do you think about it?