If you’re new to Forex trading or on the lookout for a better broker, you could easily be overwhelmed with the choice of options. This is why we’ve put together a checklist with the top 5 criteria to look out for when comparing brokers against one another.
• Spreads. Brokers can quote either fixed or variable spreads – to a large extent, this depends on their trading platform and the agreements they have with their own liquidity providers. But whatever the format, you’ll want a broker with the tightest possible spreads.
• Leverage. If you can’t afford to tie $10,000 or even $1,000 down in a trade, leverage can you help you trade with the big boys for a fraction of the investment. For example, you could open a $1,000 position off the back of a $5 deposit on a 1:200 leverage ratio. If you take time to compare brokers, you’ll find large difference between them. However, leverage does come at a price. And the higher the leverage, the wider the spreads.
• Trading platform. A trading platform can make or break your trades. If it’s slow or buggy, you could find it hard to open or close positions even at quieter times of the day. It’s a good idea to choose broker that supports MetaTrader 4, one of the most popular Forex trading platforms for retail FX investors. Nowadays, you’ll find over 300 MT4 brokers according to MetaQuotes, the company behind the platform.
• Market access. Brokers use a wide range of acronyms to describe their level of market access, from STP to ECN and DMA. STP stands for Straight-Through Processing. STP brokers deliver real time market prices from liquidity providers (banks and other financial institutions who “make the market” in currencies). They can also route your orders directly to these liquidity providers, although some with execute orders on your behalf.
• Withdrawal options. It’s easy to get carried away and start trading before you even consider withdrawal options. However, earning big money on your trades is no good if you can’t withdraw your winnings. You’ll get a good feel for withdrawal options by looking at your broker’s funding methods – they are typically the same. Make sure you check these thoroughly before opening a live account to avoid surprises down the line.
If you’re unsure where to start, give ForexBrokersAZ a look. The company compares Forex brokers across wide range of countries including the UK, Canada, India and Indonesia. You’ll find comparison tables with spread, leverage and user reviews.