How to Choose Trusted Forex Trade Brokers

GuruFocus.com
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- By bloggershishir

A broker is the financial intermediary in an investor's operations. In other words, the broker is the intermediary between buyers and sellers. In choosing a good broker, consider the following ten tips:

  • Avoid welcome gifts



Avoid brokers that offer welcome gifts such as 30% welcome bonuses or Ipad type gifts. In most cases, if you stop to read the fine print of the conditions, you realize that to be able to withdraw the bonds or the money itself, you are more likely to end up losing all the money deposited. One fact to keep in mind is that if one wants to withdraw money and does not meet the conditions to do so (almost always), the bonus received, or the amount of the gift made will be deducted from their account.

  • Choose a solid and respectable broker




Choose a broker with a lot of net worth, because the greater the capital of the firm, the greater the protection of your funds. To determine the vitality of a broker, you should observe its number of employees. If it is a solid and respectable organization, it will have hundreds of employees, who will be able to assist you 24 hours a day. Also, they are likely to have hundreds of thousands of accounts. If the firm has few employees it is likely that they have a small capital or that they are unable to provide the personal assistance you need.

  • Choose A Regulated Broker



It must be considered that the broker is regulated by a competent entity such as NFA (United States), FSA (United Kingdom), FINMA (Switzerland), among others. We must avoid all those brokers who are in tax havens. Brokers in Europe, Canada, Hong Kong and Australia, have adequate regulation and capital requirements are high. If your company is in a third world country, the current regulations may not be adequate.

  • Greater Leverage



Leverage can help you make considerable profits, but it can also cause huge losses. A broker is recommended to provide leverage so that in this way, it can effectively operate in the currency market. Naturally, greater leverage means better opportunities for you. Some brokers offer a leverage of 100 to 1, which means that for every dollar in your account, you can borrow and use up to EUR 100. Other brokers offer up to 250 to 1. When choosing a broker, you must consider the leverage offered, since this could be your ally to win big.

  • Types of accounts



It is advisable that the broker is able to offer different types of forex accounts. For example:

The "mini" accounts require a minimum margin or equity that could be $250 and up. With this type of account, you can trade in forex but the level of leverage is lower.

The "standard " accounts require at least $ 2000. This type of forex account allows you to open larger positions.

The "premium" account enables the opening of even greater positions.

It is preferable to have available real-time information and good graphic tools

They facilitate daily decision making, helping to choose the investment in a more optimal way.

  • Have a free demo account



It is recommended that the broker have a free demo that operates in real time because it allows you to practice and learn with real or fictitious money the characteristics and services of the broker you want to hire before opening a real account.

Avoid the so-called snipers or hunters brokers. These brokers usually buy or sell based on pre-established points and usually perform these maneuvers to increase their profits. Avoid these types of brokers. To know who these brokers are, you must communicate and interact with other operators online or through forums.

  • Automatic execution



One of the most important variables to consider when choosing a broker is the speed of the executions. The best thing is that the execution be automatic so when we want to enter or exit the market at a certain price, the broker respects it.

  • Do not pay commissions for Spot



Forex traders do not pay commissions for placing orders, unlike those that operate in futures markets. Actually, a trusted forex broker is a simple broker and not a broker or agent proper. Therefore, they obtain benefits through spread, which is the difference between the value of the "bid" and the "ask".

  • Remember the differences between hiring a market maker and an ECN (Electronic Communication Network)



You must consider the differences between an ECN and a market maker to know what kind of broker can best meet your investment needs.

It must be remembered that: price volatility in an ECN is usually higher than in a market maker's network, ECNs do not usually allow leverage, unlike market makers. In addition, ECNs usually give the prices that their liquidity providers mark, with the exact same margins, and then charge a commission for each round-turn operation. However, market makers allow opening an account with fewer resources and their platforms are easier to use.

Do not forget that the market maker or market maker covers the position with other operations or does not cover it, in a way that assumes the opposite risk to yours. That is, if you win the market maker loses, which generates a conflict of interest.

  • Good customer service



Customer service is very important because it will help you solve any possible incidents you may have. It is advisable to find a broker that solves issues as quickly as possible, that does not put obstacles in the withdrawal of funds and that does not have many complaints from other investors. Consult and participate in forums to learn more about the opinions that other investors have about certain brokers.

This article first appeared on GuruFocus.


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