When investing in financial markets, we are concerned with a few things. The differences between brokers can shape our investing efficiency, costs, the markets we’re investing in, and the opportunities present.
This article will take a look at what to look out for when deciding between forex brokers; the differences between them that we need to examine before giving it our money, trust, and time.
Credibility of the forex to choose
First and foremost, different FX brokers have varying levels of credibility. This is the most intangible point of comparison, but it’s one of the most important. Opting for brand new brokers with poor reviews means you’re giving your funds to a broker lacking in credibility. The worry of fraud, lack of security, folding, and poor customer service tends to be lower with established brokers that have proven their worth over many years, and have received great reviews because of it.
Finally, it’s important to note who the broker is regulated by. Ideally, you want regulation them to be regulated by a regulator from your home country, or a highly respected regulator, such as FCA.
Maintain a commensurate fee
Keeping fees as low as possible is one of the most important points here because it can influence the profitability of your trading. This includes the commission taken on trades, as well as the deposit and withdrawal fees. Other fees to consider are the inactivity fee and account fee.
The benchmark fee can be used as a comparison between brokers, which usually includes spread, commission, and financing rate. The financing rate is the financing costs that are inflicted when margin trading - essentially the cost of borrowing money for your leverage trading.
If you’re looking to start trading for the first time, you may not want to start throwing big money around. A low minimum deposit with a low withdrawal fee can make it very accessible to trade exactly how much you want, and not a penny more.
Deposit bonus and currency
It’s difficult for brokers to differentiate, and competing solely on prices is a race to the bottom. An effective way for them to stand out is to offer deposit bonuses. This is great for new customers, who can essentially receive free money for choosing one broker over another. This can range anywhere from 1% to 100% deposit matched bonus - or more.
What base currency the broker accepts is also important, as some are restricted to only depositing USD, whilst others are more flexible.
User Interface and charting capability
A huge part of your decision should also come down to which broker is the best to use, from a user experience point of view. This makes a big deal because it can save you time, provide more information, make data easier to interpret which mitigates mistakes and increases the number of trading techniques you can do.
UI should be responsive, meaning that you get similar functionality on mobile. Some brokers will be purely web-based, and some will have dedicated PC and mobile software. Generally, dedicated software can be more powerful, but web-based platforms are more accessible and convenient.
Some brokers will appear outdated but have a tonne of great features, so it’s best to not rely solely on the user interface. Many newer brokers are making good use of social media elements, such as eToro, where there is a feed of trading influencers and users can copy the most successful traders.
Other features to look out for is news feeds, notifications, price alarms, mobile capability, and many others. Of course, stop losses and other orders are vital in helping automate and increase the security of your trading. Furthermore, some brokers will be able to facilitate algorithmic trading, either through having their own programmable system or being able to integrate with other languages and applications.
Markets available in Forex
What markets the broker allows you to trade in makes a big impact on your trading. Whilst some will have access to equities, others will be purely currencies. And of those FX brokers, some will access more currencies than others, and many (but not all) are yet to trade cryptocurrencies.
If you are interested in margin trading, then it’s important to consider maximum leverage. This ratio shows how much the trade size is increased by the broker’s margin. Maximums can often range a lot, from 1:30 to 1:5000, meaning some are a lot more restrictive than others.
Final word on investment
Deciding on the best broker is a matter of taking all of these points into consideration. Some points will be more important than others depending on the user, and many brokers can be ruled out entirely because they do not offer a particular market or feature that you require. There should be a minimum amount of credibility, regulation and maximum fees that you’re willing to consider. On top of that, you will need to be sure the needs for your trading strategy to execute are being met. Beyond these black and white lines, you can weigh up which has the best features and user experience.