The platform you use goes a long way to influencing your performance. If you’re new to FX, learning what to look out for when selecting a broker will give you the necessary headstart you need. If you’re already trading forex but are struggling because of your present broker, you’ll find helpful information here to identify the ideal platform that caters to your needs.
What is a Forex Broker?
A forex broker is a company that provides a platform for traders to connect to the retail market. Retail forex is the part of the global market that allows individual traders and small financial institutions to trade currencies and other financial instruments.
Trading forex through a broker allows you to profit by predicting currency price movements. They profit by charging fees and scalping spreads – the difference between the buy and sell price.
Brokers provide the same service but with different features, conditions, and tools. That’s why understanding what a good account should contain will help you choose the ideal FX partner.
Finding An Ideal Forex Partner
An ideal partner should provide a range of features that suit your style and enhance your experience while ensuring safety and flexibility. Here are eight essential factors to consider to find the ideal broker.
1. Regulatory Compliance
Ensure the retail broker is compliant with regulatory guidelines. An unregulated partner puts your funds at risk, and this can directly impact the safety, security, and overall integrity of your experience.
Brokerages are regulated by financial authorities like the Financial Conduct Authority (FCA) in the UK. They enforce rules to prevent traders’ exploitation, such as unfair or hidden fees. So, confirm that the broker is duly registered and regulated by an approved financial authority.
2. Low Spreads
When the gap between the buy and sell price of a currency pair set by a broker is too wide, it can cause many traders to lose significant portions of their profits. This is especially true if you prefer the scalping strategy and aim to open and close trades within a few minutes to make quick profits.
Additionally, wide spreads make it harder for traders to maximise market conditions and fill orders at a desirable price. By choosing a partner that offers low spreads, you can reduce the cost of trading, limit slippage risk, which occurs when market orders fill at a different price than expected, and maximise profits.
3. Low or No Commissions
Commissions are fees firms charge for opening a trade. Some partners charge varying commissions, while others eliminate them. Commissions can quickly add up over time, especially if you’re a high-volume trader, so choosing one with low or no commissions is essential.
4. Demo Account
A demo account is a free forex trading account that simulates real trading environments, allowing you to practice without risking any real money. These accounts display the features of a real account, including real-time currency quotes, allowing for an immersive experience.
Demo accounts are a great way to hone your skills and practice under different market conditions. Some partners allow traders to open multiple demo accounts; this can be useful for segmenting your styles and monitoring your performance over time.
5. Education and Training
Whether new to FX or on your way to being a pro, learning, unlearning and relearning is vital to constantly improving your skills. A good broker should provide educational materials about the market and how you can use a platform effectively. Many modern partners now offer live sessions for traders to learn from experienced traders and get feedback through Q&A sessions.
6. Research and Analysis
A good forex partner provides various research and analysis tools to help you make informed decisions. Research and technical analysis tools are the most important considerations when trading because their availability and functionality influence the profitability of your trade.
Some research and analysis tools that should be in your forex account include the following:
- Technical analysis tools for analysing charts, e.g. charting software, indicators like moving averages, RSI, MACD, and Bollinger Bands, and drawing tools.
- Fundamental analysis resources like economic calendars and market news to stay current about changes that could influence the market.
- Sentiment analysis tools to get the general perception of traders and investors about market trends.
- Trade ideas and signals, such as trading signal alerts and copy trading services, are helpful for traders too busy to trade actively.
- Risk management tools like position sizing calculators and economic event alerts reduce risks and manage trades effectively when economic events tilt the market against your trade.
- Backtesting software to test your strategies using historical data and assess their effectiveness.
- Algorithmic trading platforms, where you can opt for a bot to trade on your behalf via automated trading.
7. Customer Support
Customer support is crucial when choosing a forex partner. This is because you will likely need to contact customer support, whether to ask a question, resolve a problem, or make a complaint. Check online reviews of the broker to know how well their customer service works. This way, you can select a partner you’re confident will quickly respond if you have problems with your account or trades.
8. Trading Platform
The trading platform is the software you will use to place trades and manage your account. Many FX traders prefer MetaTrader software as their preferred platform because of its advanced features. Because of MetaTrader’s versatility, most partners integrate it into their platforms. However, this is not the only thing to look out for; ensure the trading environment is easy to navigate, accessible on mobile and web, and offers the needed features.
Finding an ideal partner requires considering factors like regulatory compliance, research and analysis tools available, fees, and customer service responsiveness. Before narrowing down your choice, use the broker’s demo account to get insight into what to expect from a real account.
