Before you can trade forex, you must choose a good and trusted forex broker and open a trading account first.
A forex broker is a company that provides online forex trading facilities, and in return earns profit from the difference in selling at the bid and ask prices (Forex Spread).
However, the number of brokers around the world is very large with hundreds of companies, so we must be careful to choose a good and reliable forex broker so as not to get caught in a scam.
Also Read: 4 Ways How to Distinguish an Honest and Scam Forex Broker
How to choose a good forex broker? The easiest way is to ask or ask for recommendations from friends who are experienced in forex trading.
What if no friends can tell? No need to be confused. This article will review the various criteria that should be considered when choosing a good and trusted forex broker.
Also Read: 6 Types of Forex Brokers: DD, NDD, Hybrid, STP, ECN or Regulated?
Criteria for a Good and Reliable Forex Broker
Also Read: What is a Forex Broker? This is the Definition and Regulations!
1. Clear Broker Identity
A good forex broker has a clear track record, starting from when it was founded, what company it belongs to, to where the office is located.
A good forex broker should provide a complete communication medium, from chat, email, telephone, to office addresses.
On the other hand, you need to be careful when you find a forex broker with an address that is only a PO BOX or an ambiguous address for its location.
Also Read: 10 Rules and How to Trade Forex For Beginner Traders
2. The Broker’s Regulatory Status Can Be Proven
Regulated brokers are often considered better than unregulated brokers, although there is no 100% guarantee. A regulated broker means that it has obtained a license (licence) from certain financial regulators.
A good forex broker must be subject to the regulation and supervision of the financial regulator in the country where the forex broker is based or operates. For example:
- In the United States, brokers must be registered with the Futures Commission Merchant (FCM), the Commodity Futures Trading Commission (CFTC) and be a member of the NFA.
- In the UK, forex brokers need to first obtain a license from the Financial Services Authority (FSA).
- In Cyprus, the regulation of forex brokers is under the authority of CySEC. However, law enforcement is only of moderate quality.
- In Indonesia, the relevant regulator that oversees forex brokers is BAPPEPTI (Futures and Commodity Trading Supervisory Agency).
Usually, the broker will list the regulatory status (‘regulated’ or ‘licensed’) on its website. However, sometimes there are entities claiming to be regulated in a country, even though that is not true.
Therefore, you need to crosscheck on the relevant regulator’s website to ensure it is correct. A complete list of regulators and links to their respective sites can be accessed at the Forex Broker Regulatory List.
There is nothing wrong if you deliberately choose an unregulated forex broker, because there are not a few such brokers who turn out to be reliable. However, it is best to avoid forex brokers who are actually committing fraud regarding their regulatory status.
Also Read: 4 Knowledge and Aspects of Forex Psychology for Beginner Traders
3. Communicative Customer Support
The broker’s commitment to providing support at least 5 days a week, must be the main requirement. The more complete the communication methods (email, telephone, fax, skype, chat) the better.
Live support (chat) facilities can really help us, when we need assistance to overcome technical problems when trading forex.
The quality of support and response may vary from one broker to another, so be sure to test them before opening an account.
Here are tips that you can try: Make some questions about any forex, then convey to them, can be via email, phone, chat, etc., then see the speed and quality of their response.
Indeed, pre-sales service is usually better than post-sales service. So, let’s take it simply, if the pre-sales service alone is disappointing, especially when you become a customer.
Also Read: 9 Types of Orders in Forex Trading that Traders Should Know
4. Forex Broker Facilities Make It Easy And According To Your Needs
After proving the identity, regulation, and reliability of the CS broker; The next step is to review its trading services and facilities. In general, traders will rate a broker as good if it provides:
- Low spreads; The closer to 0 (zero), the better.
- Leverage starts from 1:100. Leverage that is too high in the thousands can be dangerous and result in rapid bankruptcy; But if it is lower than 1:100, it will restrain you from opening a trading position.
- Easy to download and use forex trading platform. In general, world forex traders use the Metatrader platform. However, if the broker provides a different platform then it doesn’t matter; As long as price data can be obtained smoothly (no lags or hangs), fast order execution, complete technical analysis tools are available, and you can use them proficiently.
- Forex demo account, which is a trading account that can be used to try the platform and broker services for free without the need to make a deposit first.
- Various methods of deposit and withdrawal of funds, ranging from Bank Wire (bank transfer) to e-payments such as PayPal, WebMoney, and Fastpay.
Also Read: 6 Times and Hours to Forex Trading: From Asian to American Session
Checklist for Choosing a Good and Trusted Forex Broker
Overall, from the above description it can be concluded in a brief checklist of the important things when choosing a good forex broker.
1. Broker Identity
The company name and office address are clear.
2. Regulatory Status
The broker has obtained a permit (license) from an official regulator, or honestly stated its regulatory status.
There are many ways to contact the broker, and responses are responsive.
Low spreads will provide greater profit potential and save you more money.
The minimum leverage is 1:100 (standard account), but be careful, too high leverage can make you bankrupt quickly.
6. Forex Trading Platform
Smooth when used, there are complete analysis tools, and easy to use for trading.
7. Demo Account
A free demo account is available, without the need to deposit funds first.
8. Deposit and Withdrawal
There are various methods, including via Bank Wire and online payment systems (e-Payment).
This completeness is the basic criteria that are usually needed by forex traders. However, you may have your own needs.
Also Read: Hierarchy and Forex Market Structure that Traders Should Know
Also Read: History of Forex Trading: From Era of Gold to Online Trading Like Now
Therefore, when choosing a forex broker, pay attention to its features. If you don’t find a service or offer that meets your needs after reviewing a broker, then look for another forex broker.
To make it easier to choose a good and reliable forex broker, you can visit the list of popular forex brokers compiled by ForexMedia News. Reviews of features have been summarized in such a way to make it easier for you to choose a broker according to your needs.