According to research in South Africa, The Forex retail market is always growing and understandably so. It has the greatest potential for profit out of any global market. Your choice of broker is paramount to success so here are crucial Forex broker facts to consider before choosing a Forex broker.
Just as the Forex market is a highly popular marketplace for traders, there are literally thousands of Forex providers out in the market. Unfortunately, not all of them are reputable or operate above board.
It is imperative that you properly research the Forex broker that you will be trusting with your money and with your future in the Forex market.
Make sure that the Forex broker you choose has all the qualities and features that are explained in this article.
Once you’ve chosen a great broker to partner with, then you are well on your way to having a successful trading experience
How well regulated is the Forex broker?
A high level of regulation for the broker you choose when Forex trading is the most critical factor when making this choice.
The 24/7 global nature of the Forex market is extremely difficult to regulate and so the best way to ensure that you are protected is to make sure your broker is highly regulated.
Regulation will make sure your broker keeps your money safe and conducts itself according to standard financial market practices.
It also mandates that the broker is well capitalised in the unfortunate event of a trading loss.
Although most countries have their own regulatory standards, these standards can differ.
It is usually a good idea to pick a well-known, established Forex broker that is regulated in different regions to ensure an overlap of regulation.
It’s also great additional level of security and regulation when the broker has your funds in a segregated account.
You are then assured that they cannot use your money for any of their own expenses or operational costs. The funds are held and only accessible by you alone.
Researching the credibility of a Forex broker isn’t very hard. There are regulatory agencies all over the world that separate the trustworthy from the fraudulent.
Below is a list of the top regulated countries with their corresponding regulatory bodies:
United States: National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC)
United Kingdom: Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)
British Virgin Islands: BVI Financial Services Commission (FSC of BVI)
Australia: Australian Securities and Investment Commission (ASIC)
Switzerland: Swiss Federal Banking Commission (SFBC)
Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
France: Autorité des Marchés Financiers (AMF)
Canada: Investment Information Regulatory Organization of Canada (IIROC)
Cyprus: Cyprus Securities and Exchange Commission (CySEC)
Dubai, UAE: Dubai Financial Services Authority (DFSA)
Other additional authorities to consider when trading from South Africa and Africa include:
Mauritius: Financial Services Commission of Mauritius (FSC Mauritius)
South Africa: Financial Services Conduct Authority (FSCA)
Seychelles: Financial Services Authority (FSA Seychelles)
Nigeria: Securities & Exchange Commission Nigeria (SEC Nigeria)
Kenya: Capital Markets Authority (CMA)
If the Forex broker you are looking at isn’t a member of any regulatory bodies in this list above, then don’t even consider them further.
Is your Data and Privacy Secure with the Forex Broker?
Data security is very important when Forex trading for the obvious and maybe not so obvious reasons.
When opening an account with a Forex broker you will be required to submit copies of your utility bills, passport, as well as your credit card numbers and bank account information.
You need to KNOW beyond a shadow of a doubt that your financial information is safe and will not be stolen.
You also want the peace of mind and removal of concerns if there are any doubts as to your brokers complete trustworthiness and level of security.
Make sure to do your proper due diligence to ensure that the Forex broker you are considering implements strong security features.
Does the Forex broker offer fast trade execution?
In Forex day trading, time is crucial. You must be able to enter and exit a trade very quickly on the brokers platform.
With today’s technology, it is inexcusable for a Forex broker to not offer very quick executions on your trades.
It is a given that your broker should fill your trade at the best possible price. A few pips difference in price can make that much harder to win a trade.
Does the Forex broker have a large range of products?
In the past, if you had an account to trade Forex with a broker that meant you could only trade currency.
Nowadays, brokers are allowed to trade in stock indices, precious metals, commodities, cryptocurrency, bonds amongst other things from your single Forex account.
This availability increase your chances of making profits and it is great to have options as you grow in your trading career.
Does the Forex broker provide low transaction costs?
No matter what kind of Forex trading you do, day trading or longer term strategies, there will always be transaction costs, commissions or fees of some sort. It’s how brokers make money.
Every single time you enter a trade, you will have to pay for either the spread or a commission or some other type of fee structure.
It’s not always advantageous to look for the cheapest broker that charges the least fees or commissions.
Sometimes you may need to sacrifice low transactions for a more reliable broker.
Some of these more expensive brokers offer a whole host of value adds to help you make money and be a better trader, so you have to really weigh the options.
But, it is true that the more costs you pay per trade, the more it can eat away at your profits.
Make sure you know what you need and research your available options. It’s about finding the balance between security, support, education, tools and low transaction costs.
What Forex Trading Platform are they using?
Your online Forex trading platform is the primary tool for you to trade on. Your trading platform must be user-friendly, stable, powerful, with many customisable features and be able to grow with you as you grow in trading.
Many brokers offer several Forex trading platforms for you to choose from and this is a great thing.
Some of them also have their own proprietary platforms and these can be brilliant; often providing features that no other system has.
At the same time some proprietary platforms can also be mediocre. Having your own proprietary platform doesn’t necessarily ensure that it is very good.
Whichever platform you consider make sure they offer the following:
- a free news feed
- easy to navigate (not overly complicated)
- easy-to-use technical and charting tools
- a variety of analysis and educational materials
- customisability of the trading screen
- allow trading in multiple ways (web-trading, mobile, social trading etc).
Does the Forex broker suite your trading style?
Your particular Forex trading style and strategies should also be a factor in determining the type of Forex broker that you choose.
If you are day trading or are a short time trader, for example, you should choose a broker that has the Currenex platform which allows scalping.
If you are a long-term trader, you will be less concerned with trade execution speed and more concerned with your broker’s overnight interest rates.
Choose according to your specific needs and trading style.
Does the Forex broker offer excellent customer service?
No matter how much automation and technology advances we make in the world of Forex trading, mistakes will happen. Problems will occur. To expect they won’t is naïve.
So, it is of absolute importance that you choose a Forex broker that has great customer service and more than one channel of communication.
The way a Forex broker responds to and deals with account or technical support issues is just as important as their performance on executing trades.
Quality customer care services will help make things easy not only when it comes to opening new accounts, but helping you understand how Forex trading works and being highly responsive when things go wrong.
Preferably choose a Forex broker that has 24/7 customer service on multiple channels and that are also reachable in your country time zone.
First prize is being able to contact the Forex broker via telephone, but not every broker can afford to do so especially if they have a big client base.
Make sure they have great reviews, have won awards for customer service and have great response times.
When it comes to online Forex broker reviews, look also at the broker responses to see how they responded to a negative review.
Remember 90% of customers complain compared to those who give a positive review, so negative reviews are not always a determining factor.
If a Forex broker is well-known for their customer service it goes a long way to show you how you will be treated once you become a client.
What type of trading tools and educational materials does the Forex broker offer?
This question boils down to this: Is the broker you are looking at invested in you as a Forex trader? Do they have a win/win attitude?
Just like customer service, providing great Forex education tools can be an indicator on how invested your broker is in helping you become a successful trader.
A broker knows that when you win, then they earn as well.
Great, reputable online brokers will usually provide Forex educational materials including videos, article, webinars, e-courses, and seminars at no extra charge.
But remember that the quality of these materials varies depending on the Forex broker that you choose.
They may offer these things just as a way to attract clients and to say that they have educational material.
Is the material good, comprehensive and well thought out in such a way that you will be able to keep learning as you grow?
It is crucial that you check out their Forex educational resources and see if they are offering quality trading tools and educational materials that really helps you and grows with you.
One educational resource that is also a necessity is a demo account. This is very important, especially if you are a beginner Forex trader.
Before risking your own money, it is absolutely crucial you trade with a demo account.
A demo account is the best way a Forex trader can test a trading strategy and evaluate how they are as a broker without risking your trading capital.
It might not be perfect, but it is better than the alternative of jumping straight into Forex trading real time and finding yourself in over your head, and worse yet, losing all your funds.
Does the Forex broker make Deposit and Withdrawal easy?
Good Forex brokers will allow you to deposit funds and withdraw your earnings hassle-free. Full stop.
There is no reason that a Forex broker needs to make withdrawing your profits difficult, since the ONLY reason they hold your funds is so that you can trade with it.
Your broker should make sure that the withdrawal process is speedy and smooth. If they don’t then that should be a red flag that there is something wrong.
However, be aware that depending on the withdrawal or deposit method, country of origin and your bank, withdrawal times can vary from 48 hours up to a week.
Does the Forex Broker offer Bonuses?
Most brokers offer bonuses to their new Forex clients, which is a great way to increase your trading capital.
Some brokers will give up to a 50% bonus on your first deposit, for example.
There are also different Forex trading bonuses or loyalty incentives that may be offered by your broker, depending on the account you have, your trading volume and trading amount.
Just make sure that you read the Forex broker’s bonus terms and conditions to understand all the advantages and restrictions that come with accepting a bonus.
Needless to say if the broker hides the T’s and C’s or they are difficult to find that is a red flag.
Does the Forex Broker have a professional website?
As in any sector of business, image is everything. The way the company portrays themselves on their website can give you great insight into what the company itself is like.
Obviously, a website, like many other things can be a matter of taste and preference.
However, there are basic things that all good websites should have if a company actually cares about how it interacts with the public.
Is it professional looking, organised and easy to navigate?
Is there a great deal of transparency in the Forex info you and other clients need to find? Or do you have to dig for info, and end up frustrated?
These are questions you need to ask when learning about any company, but when it comes to putting your hard earned money with a Forex broker, make sure they are professional and organised in every part of their business.
Does the Forex broker offer a variety of account types?
Not all traders are alike and different traders have different needs. Most good Forex brokers will have different account types depending on the amount you want to deposit.
They each will have their own minimum deposit and minimum lots requirements. The lots allowed and the leverage provided will also tend to be different for each account type.
Also, the spreads will also vary depending on the type of Forex trading account you have.
Check out what account types are offered by a Forex broker to see if you find one that matches your requirements.
Does the Forex broker type matter?
Forex brokers are the middlemen between individual traders and market makers. They process your orders by computer platforms called a Non-Dealing Desk (NDD) or they may have a dealing desk.
The spreads that are offered to Forex traders differ from broker to broker and they may be fixed or variable.
Brokers can earn their commission as a percentage of the spread or they may charge other fixed fees per trade.
Forex brokers may also be dealers, known as market makers, and they have a Dealing Desk which processes the orders.
There are many types of Forex brokers and they can differ in almost every aspect including on how they earn their money from you as the trader.
These differences aren’t right or wrong, they are just different and different brokers suit different traders depending on what you need for your capital amount, experience level and trading style.
In short, do your due diligence and make sure that a Forex broker suits your specific needs.
What is the Forex broker’s Margin Call and Leverage requirements?
Before making orders with any Forex broker you have to be aware of their margin call requirements.
A margin call occurs when the value of your trading account falls below what the broker requires to be present in your account.
A margin call refers to a Forex broker’s ability to demand that you deposit additional money or securities into the account so that it is brought up to the minimum value, known as the maintenance margin.
The rules that are applied in such situations may differ between Forex brokers who may prefer to close the investor’s deals or ask him to increase the margin.
It is important to know this and keep an eye on your account balance, so you don’t get caught out by an automatic margin call and lose profits because of it.
We have seen many Forex traders making complaints about this to their broker but they did not read or understand the margin requirements.
You really can’t complain if you didn’t read the terms of doing business with the Forex broker.
Just make sure that you are comfortable with the brokers protocols regarding dealing with margin calls.
The number of online Forex brokers has exploded over the last decade with the incredible growth and popularity of Forex trading.
With social media in particular Forex brokers are actively and aggressively marketing to get as much of the market share of new traders as possible.
They all claim to offer quality services and everything you would need to be a successful trader.
The unfortunate truth is that not all brokers are what they promise.
With increased interest to make quick money from the average Forex beginner, there are many unscrupulous brokers out there that will promise the moon and make unrealistic guarantees.
There are some that will steal from you outright, while others make profits at the expense of the Forex trader.
But there are also top Forex brokers who are well established, offer an amazing array of services and resources; who realize that by helping you become a great trader they will win in the long run.
As discussed in this article on 15 crucial facts to consider before choosing a Forex broker, take your time in finding the right Forex broker fit for you. There should be no reason you don’t find the right broker and have a long, successful trading career.