With Forex trading becoming more and more common these days, some of you may want to start trading as well. However, most beginners are often stuck at the very first step of choosing a broker.
Here are 3 important things you need to look for when you are choosing a Forex broker:
1) Low Spreads
This is probably the first thing most people look out for. While typical stock broker charges you a certain brokerage charges per trade, Forex brokers have none of those. Instead, you buy and sell according to their prices.
This means that the spread you are paying for is essentially the cost of your trade. That is why it is ideal for you to select brokers who charge a low spread.
While spreads may vary from broker to broker for different currencies pairs, you can still take the standard currency pairs like EUR/USD as a basis for comparison. On an average, it generally shouldn’t be more than 2-3 pips.
2) Customer Support
Even though having a low spread is very important, you must not overlook the support provided by the brokers. This can be measured in terms of the ease of accessibility to their customer services and availability of platform tools. Good brokers have platforms that are easy to use and have access to extensive technical tools that will help you with your trading.
The availability and ease of support is important especially for traders who are just starting out.
Useful Tip: Open a demo account with the broker and test out their support. It’s also a good way for you to familiarize yourself with their platform and get used to trading Forex. Even if you make any mistakes, you can sleep peacefully knowing that it’s just a demo account.
Given that there are so many Forex brokers both locally here in Singapore as well as overseas, choosing one can really be a headache. With such choices available, you would prefer to have regulations on your side.
For Example: Forex brokers in Singapore are highly regulated so you can trade with them with a peace of mind. However, these extra safety measures do come in the form of higher spread costs so it’s a give and take.
There are usually less regulations required for overseas brokers hence you often find that overseas brokers have lower spread cost. However, be careful of selecting brokers from distant countries with no physical office. If anything happens, it would be hard for you to get a hold of them.
If the spreads look too good to be true, they normally are.
Useful Tip: Before you dive head in and transfer a huge portion of your capital into your broker, you should first test their withdrawal and deposit system. You can do this by depositing a small amount of money into it and then requesting to withdraw it after a few days.
This would be a quick and simple process for the good brokers. For other questionable brokers, they might impose limits on amounts that you can withdrawal, or insist that you make a minimum number of trades before you can withdraw the amount.
I recommend that you avoid brokers such as these.
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