Here at ForexTradeInformation our goal is to give you, the trader unobjective, realistic information on the over the counter trading markets. Since the welcome inception of online Forex brokers to the trading arena, suddenly everyone could have direct access to the trading markets, so a new era had begun. It opened the gateways to allow the “average Joe” to become a trader from the comfort of his or her own home, whether with the goal of trading for a living, for a second income or even for a hobby. Until fairly recently the Forex industry was quite unregulated, which wasn’t great for the traders. Read more...
As you might already know, the Forex market is decentralised. This means that there’s no single central agency controlling the market. There are many government departments and independent and private agencies that manage the operations of these markets. These agencies act as watchdogs and undertake many processes including giving market licenses to brokers (and sometimes taking them away too). If you want to trade in the Forex market, make sure you select a broker that is adequately licensed by such authorities.
Whether you’re exchanging currency at the airport or at the ATM, you’ve already done Forex trading, perhaps without even knowing it. Except that when you deal with brokers, you turn this little exchange into a money-earning medium. When investors deal in Forex, they buy and sell currencies in the Forex market. A few years ago, individual investors wouldn’t have been able to trade in this huge market. Currency trading was reserved for the big firms and financial institutions.
If you know the risks and are prepared to lose any money you invest, you are entering the market with eyes wide open and can even earn a lot in the Forex market. Any broker, whether it is a forex, CFD or crypto broker can even supply you with a demo account before you deposit funds, to test out their offering or the Forex market generally.
Importance of Forex Brokers
You will need a Forex broker to connect you to the Forex market. You’ll find both regulated and unregulated brokers. A regulated broker will follow all the Forex regulations and thus offer you reliability, safety, and security.
Your broker is in effect, your link to the market. You will deposit through them and they will give you access to a variety of trading platforms. As there is so much competition in the market, brokers are offering more and more to attract traders, from trading signals, education resources, social trading, bonuses and promotions.
Spreads
Brokers earn by taking a small slice of the pie when you trade currencies, this is called the spread, it is the difference between the sell and buy price. This value is very small and transparent, which is why traders don’t think much about this tiny difference while trading. For example, if the current value is 1.1616 EUR/USD, you might be put in as 1.1618 EUR/USD. It’s so small that this value is often called a pip.
TIP: When checking out a broker to work with find out their spreads and if their spreads are fixed or variable.
Bonuses
You’ll find several brokers offering attractive bonuses to new customers. These can be welcome bonuses, redeposit bonuses or cashback on your trading. But be aware that there’s no point of these bonuses if you cannot cash out and convert your profits. A lot of brokers offer tantalizing bonuses which have so many strings attached, that you never actually see the bonus in real terms. Certain regulators like CySEC in Cyprus no longer allow their member brokers to offer these types of bonuses for exactly that reason.
Regulation
Not all brokers are created equal and just because a broker is regulated does that mean he is a good broker. But regulation does protect your interests as a trader. Regulated brokers must fall within layers of compliance and avoid unethical practices. They face regular reviews, evaluations, and audits, thus forcing them to stay ethical and maintain a high-quality standard in their services.
The main advantage of dealing with these regulated Forex brokers is that you can easily withdraw money from the trading account you’ve been working on. Trading with unregulated brokers can be troublesome. While there might be attractive initial discounts, it can be difficult to get your money from your trading account.
If a broker offers you a deal that seems too good to be true, they might be unregulated. The risk with them is that you might not get the money back once you invest in the market. First-time customers who fall for these brokers often leave with a bad taste in their mouths and swear never to return to the Forex market again. Make sure you don’t make that mistake. Deal with a trusted broker who is properly licensed and regulated.
Regulated brokers have to keep adequate funds to help them complete and execute contracts. Also, they are not allowed to use their customers’ funds to clear any debts they hold.
Since not all Forex brokers are regulated by government or independent agencies, make sure you check the background of the broker before you begin your investment journey. Check the financial license of the broker that’s going to help you trade in the Forex market. Also, check their financial background and customer support. They must be financially sound and be always available through customer support.
Top 5 Forex Brokers
| Broker | Bonus | Min Deposit | Payout | Review | Open Account |
|---|---|---|---|---|---|
|
Plus500 does not offer bonuses, but their good reputation makes them highly recommendable. | $100 | Review | Visit Broker | |
|
Win cash prizes and other things like tickets for Arsenal or other football matches | $250 | Review | Visit Broker | |
|
30% deposit bonus on first deposit | Refer to a friend and receive $400 | $100 | Review | Visit Broker | |
|
N/A | $500 | Review | Visit Broker | |
|
$200 | Review | Visit Broker |
How to Choose a Forex Broker
There are loads of brokers out there and finding the right one can be a difficult task. Let’s look at some points that you should consider while selecting a Forex broker.
Security
Any good broker will be able to provide you a high level of security for your transactions. You might be dealing with thousands of dollars and you just can’t hand them over to random people who claim to be legit. This is why you must check their license and regulations. As explained earlier, it’s important to use only regulated brokers who are ethical and won’t just run away with your money. There are several regulatory agencies that make sure their brokers perform to the best interest of their clients.
Low transaction costs
No matter which currency pair you choose, there will be some transaction costs. You’ll need to pay a commission or a percentage to the broker. So it’s natural that most people look for brokers with the cheapest rates. However, while cheapest rates are an attractive factor, your focus should mainly be on getting a reliable broker.
While not all reliable brokers will charge high fees, the secret to finding the right broker is balancing the fees with reliability. You should find a broker that’s reliable and also charges spreads that make sense.
No dealing desk/dealing desk
You should never have to pay a charge for depositing funds and unless you are working with an ECN/STP broker, you should not pay a commission.
An ECN/STP broker is a no dealing desk broker that doesn’t take the other side of the trade to you. Rather they pass along your trades to a third party that brings the broker lower fees as a result of volume. There is nothing wrong with working with a dealing desk broker, it is a matter of personal preference.
Easy deposit and withdrawal
A good Forex broker will let you deposit and withdraw money without any hassles. While depositing is easy for all brokers, some make withdrawals really hard. Your money might look good on the trading account but what’s the point of high numbers when you can’t withdraw them on time?
Any reliable broker will make it easy for you to withdraw your profits. The only reason to let your broker hold your money is to make trading easy. If you’re having a hard time getting your money back, they aren’t good brokers.
A simple and reliable trading platform
In forex, almost all trading occurs through the trading platform of the broker. This means that the platform you choose must be simple to understand. Always check their platform before committing to them. If it’s not user-friendly, you’ll have a hard time understanding how it operates.
Do they have a newsfeed? Do they offer charting tools? Do they let you access all the information that will help you with the trade? Keep all these points in mind while selecting a platform.
Many traders like to use MT4, it is the most popular platform. Does the broker you choose have it?
Customer service
There can be some unexpected situations sometimes. Your broker must have a customer service team that can handle your questions. Since Forex is a very volatile market, you might meet some unexpected conditions in which you’d want to contact your broker. If they are unavailable, it can lead to a lot of losses. Make sure your broker offers excellent customer service.
Forex Trading Risks
Forex market is lucrative but also comes with risks. This market allows you to play with a significant amount of money and generate huge profits. But it can also make you face big losses. Before you dive into the Forex waters, you must know about the risks as well.
Here are some common risks that you might face as a trader:
Risk of not closing trades at the right time
Since the Forex market is open 24 hours, there is a chance that you might not convert at the right time when the prices are high. It might be night time in your country when the market rises. Or you might want to purchase when the market drops. Forex is online 24/5, leading to a risk of not exchanging at the right time.
A Market based on speculation
The Forex market is largely based on speculation. And since a given prediction may or may not be true, your money is under tremendous risk.
Volatility
The Forex market is influenced by world politics and news, and turbulence in a part of the world can affect all currencies.
Losing track
To be able to trade in Forex, you need to stay updated about the latest positions of currencies. If you lose track in between, you can lose your money.