With the current rise in popularity that forex trading enjoys, more and more prospective investors are turning to forex brokers for help in managing their investment funds. Following are a few factors you need to consider in evaluating possible brokers you will assign to handle your trading activities:
Available Forex Currency Pairs – Make sure that the broker has the particular currency pairs that you are interested in trading. Although there are brokers who offer a wide range of options, some actually have only a limited number of pairs. This, however, should not be a concern if you are thinking of trading only the major pairs. But if you want to trade high volume pairs, find a broker who offers more options. There are even forex brokers who offer other products like futures options and stocks that you can trade on the same platform. Just be sure to check out the respective commission rates.
Downloadable vs. Web-based Trading Platform - Trading platforms that you can download and install such as the MetaTrader or Sierra Charts are ideal if you want to trade from home or from anywhere. However, if it would not be possible for you to install the software you will need to trade from, find forex brokers who have internet-based trading platforms instead.
Spreads – If the broker you are considering is a market maker, compare how their spreads fare against other brokers. Note that spreads can easily change with the latest news.
Managed Forex Account – If you do not have time to trade on your own or too busy to learn the workings of the forex market, then an account handled by a professional manager may be for you. However, this may expose you to incompetent and poor performing brokers, or worse, to scam threats.
Broker’s Performance – Evaluate the brokers’ performance over a given period of time. Some brokers have good track records that produce profitable results for clients most of the time. But before signing up, discuss how much commission they charge and their risk management strategies. Other questions to ask: Does the broker have margin requirements? What if your account falls below a specified amount? Is the broker under government and private regulation?
Demo or Trial Version – Look for a broker that offers a demo version you can test to have a feel of the real trading market.
Deposit and Withdrawal Charges - Some brokers do not charge for deposits and withdrawals. Some charge for either one or both.
If you can afford it, try opening small live accounts with a few brokers for comparison testing. Observe how the spreads will go at certain indicators or timeframes. There are brokers that perform better with long term positions, while there are brokers that are ideal for day traders. Ultimately, the key is in finding the forex brokers who can work best with your particular needs and preferences.
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