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Foreign exchange is the largest financial market globally, with over $4 trillion traded every day. There is no central market for forex trading. The brokers connect the traders to the trading markets. Due to the volatility of the market, you stand to make high profits or great losses if you are not a diligent trader. One of the ways to increase your chances of trading profitably is choosing the right broker.
What is the Role of a Broker in FX Trading?
A forex exchange broker connects the individual trader to the broader forex market. Forex trade happens because of interbank currency trading with the rates changing from bank to bank.
A forex exchange account allows you to purchase the currencies and hold them, usually purchased in pairs.
A broker offers a trader an easy way to get into the banking network to trade efficiently. The brokerage makes its money through the trades you make. The broker charges you some money, also known as pips, to enter you into a trade.
If you are starting in Forex trading, the broker you choose to trade with will educate you on how to trade. Most brokers provide learning materials, conduct webinars, trading tutorials, and a free demo account to help you learn all the ropes of Forex trading. Therefore, you need to choose a trader that will pave the way towards profitable trading. Here are ways to identify the best broker to work with.
What to Look for in Forex Broker?
The first step to a successful forex trading is identifying the right brokerage to trade with. It is a difficult task, which will require you to analyze different brokers to get precisely what you are looking for. Additionally, you should have your trading goals in mind, and the type of investor you are, to help you choose the right broker.
1. Ensure the Broker is Regulatory Compliance
You cannot possibly entrust your hard-earned money to a stranger. You have to ensure that the broker is legitimate and operating on legal terms. It means that the broker you choose to work is operating under a credible regulating agency. For instance, the broker eToro is regulated by the Australian Securities & Investments Commission (ASIC), an international regulating agency. If a dispute arises between you and the broker, ASIC steps in to mediate the differences and compensate you for your broker’s wrongdoing or negligence that occasioned the loss of your money.
Other international regulating agencies are the U. S. Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA). Not all brokers operate under a regulating agency, take precautionary measures to avoid losing your money to the scammers in this market.
2. The Costs of Transacting
As a forex trader, you have to meet every transaction’s cost regardless of the currency you are trading. You will incur the trading charges in the form of commission or spread. Therefore, look for a trading broker with the best rates.
3. The Currency Pairs Offered
There are so many currency pairs available for trading and are offered by different brokers. Despite the vast number of currency pairs, only a few traders have access to great liquidity. Choose a broker who offers the currency pairs you are interested in for trading, or one that can provide major global currencies. Major currencies you should consider trading in are USD/JPY, USD/EUR, GBP/USD, among others.
4. Customer Service
Forex trading goes on 24/7, and so should be customer service on the brokerage you choose. When it comes to dealing with a volatile business as this, customer care should always be readily available in-person to offer assistance rather than a bot. Work with a broker whose customer service is responsive, fast, and polite. The best way to this is by reading online reviews.
5. The Trading Platform
Another critical factor to look for in a broker is the ease of use and the navigation of the trading platform. The trading platform should be visually attractive, easy entry and exit, easy to use, and has several technical and fundamental analysis tools. A poorly integrated interface might lead to costly mistakes leading to loss of money.
Conclusion
Forex trading is one of the most profitable ventures you can undertake. But, if not careful, you can incur immerse losses in equal measure. You need a credible and seasoned broker to help you realize the profits. However, finding the right broker isn’t easy. Take your time and research extensively to find yourself the right brokerage.
