How to choose a forex broker? This was the question I first asked myself when I wanted to open my first forex trading account.
It was nerve wrecking transferring my first $3,000 real hard cold cash by international bank transfer to a forex broker that had its office on the other side of the world.
I kept thinking:
- what if my money doesn’t show up in my live trading account?
- what if the forex broker takes my money and runs and deny that they have not received my deposit?
- What if this was a scam….?
- What if…what if?
You see, this forex broker was in a foreign country that I’ve never been to so you can Imagine I was kind of freaking out about it when I was doing this…I had so many what ifs when I was doing my money transfer.
I kept continuously checking my email and MT4 trading platform after that. Then on the second day, after like 24 hours, I opened my live trading account which had ZERO $ in it and Wooola! There was that nice $3,000 in my trading account.
I was now breathing easier.
And I know, if you’ve never had experience in opening a live trading account, you’ll feel this way when its your turn.
Forex brokers are just like what oxygen is to the lungs…you cannot live without them in the forex world. You need them.
And to find the best forex brokers, you can do it the lazy way or or the professional way. Now, I will talk about the lazy way and the professional way a bit later below.
Choosing a forex broker is one of the most important thing to do when you start to trade forex with your real money. I’m not talking demo trading accounts. I’m talking about live real cash trading accounts.
You want to be able to choose a forex broker that is:
- and meets your trading requirements.
In this post, I will give you 5 practical steps you use to choose a forex broker.
The Lazy Way To Chose A Forex Broker
So what is the lazy way to choosing a forex broker then?
- Well, when you go visit broker review sites
- you read feedback from traders that opened account with those forex brokers.
- you see brokers ranked with a 5 stars and you think that’s the best one and you open a forex trading account with that forex broker.
But here’s the big problem with such a way: you don’t really know if those reviews are genuine or not and unfortunately that’s the truth about online review sites.
The only way you will find out about a forex broker is when you actually open a live account and start trading with them.
The Professional Way To Chose A Forex Broker
The professional way to choosing a forex broker involves a lot more personal research and it involves reading reviews as well as you do your broker research.
So here are the 5 professional ways to chose a forex broker…
#1: Know What You Want From Trading
These are some of the things that should be in your list:
- how many currency pairs you want to trade? Does the broker provide all that you have in mind?
- what kind of trading leverage do you need and what does the forex broker provide?
- what kind of spread do you want, a fixed or variable spread brokers?
- what kind of trading platform do you want and does the forex broker provide that platform or not?
- do you want a ECN/STP or Dealing Desk Broker?
- what is amount of money you have in investing in forex and what is the minimum trading account size that the forex broker allows?
- does the forex broker has the tools and indicators you need for trading or not?
- does the forex broker has a “one click” trading feature?
- how long does it take to withdraw your trading profits and is there any transaction cost?
- how can you deposit money into your forex trading account, by credit card, paypal or bank transfer?
- which country do you want your forex broker to be in?
#2: Do The Search
Use Google, Yahoo or Bing search engines and visit every forex broker and see if any forex broker matches has has most of what’s in your wish list.
When you visit the forex brokers website:
- read their policies and trading rules.
- understand their terms and conditions
- are they transparent in the availability of addresses and phone numbers, customer support services?
- see what regulatory framework they come under…I’m talking about a regulated broker here.
You should have alarm bells ringing if you see:
- a broker that has no physical address listed on the contact us page or anywhere on the broker’s site.
- a broker that has only phone, chats, skype ID and email. These don’t count if no physical address is given.
- a forex broker’s overall website appearance is not good. Website appearance can tell you a lot about a forex broker.
#3: Read Reviews About Selected Forex Brokers
Now, the next thing you do is go online again and search forex broker reviews. Sometimes reading forex broker reviews can freak you out a lot because you read some very good things about a forex broker and then someone comes along a posts a really nasty review and you be running scared because of just a few bad reviews you read.
So here are some simple tips to stop you running:
- if the forex broker has been in the business for more than 10 years, it definitely tells you something that, this forex broker must know a lot about what it does and it is looking after its clients. Because if it does not, it won’t survive, it won’t be here today.
- if the forex broker is regulated by a respected regulator in the country of its business, then you know that forex broker has done the right thing and has taken the necessary steps to get the regulatory approval in the first place as well.
- if you see a forex broker that also offers other financial products like CFD’s, Options, Commodities etc, it does tell you a lot that this forex broker is running a large business and therefore it knows what it is doing and it has a lot of clients that are trading with it.
Step 4: Send A Test Email To A Forex Broker/Call Their Phone
Some forex brokers will be very quick in taking your money to open your forex trading account but their response to customer inquiries or customer support may be poor to really really bad.
So one simple way to test this is to get the forex brokers customer support email address and send an email asking them a question and you need to see how fast it takes the forex broker to respond to your email. If it takes more than 1 day, that should be a red flag right there.
The question to the forex broker could be like this: Do you allow forex scalping, opening and closing a trade in under 1 minute?
Also call up the customer support phone number and see how quickly if someone answers the phone and also use this as an opportunities to ask some questions to the rep there. These simple email and call test can save you a ton of frustration down the line.
Step 5: Open A Trading Account With A Fairly Small Amount Of Money
Don’t open your forex trading account with with $5,000 the first time (or with $3,000 like I did) if you are not sure and if this would be the first time you are opening a forex trading account with a broker.
You should open your trading account with anything from $200-$1000 (depends on the forex brokers minimum account opening policy). Trade that account, and make some profit and withdraw just that profit.
For example, if you open a forex trading account with $1,000 and after 2 months, you made $500 profit, then just withdraw that profit and see what happens:
- is it easy make that profit withdrawal or was it difficult?
- how long did it take for the money to arrive in your bank account?
- how much did the transaction cost?
You see, you are doing this to check out the forex broker and how it does its business. Only once you are satisfied then you can start sending the 2nd $10,000 to your forex trading account to bump it up. (Or whatever amount greater than the first initial deposit you made).