Learning how to choose a FOREX Broker to perform your online forex trading is very vital for becoming a successful trader. Online forex trading and trading cfd is hard enough as it is and therefore you want to ensure that your FOREX Broker will not make this harder for you. Therefore it is important to perform FOREX Broker comparison to Choose a FOREX Broker that suits your trading style and gives you the best service for your money. There are thousands of online fore brokers available for you to chose and they keep competing to offer the best online trading experience ranging from lower spreads, regulation, execution and more.
Selecting the best FOREX Broker
Have in mind the following criteria when performing your FOREX Broker comparison.
This is perhaps the most important factor as considered by many traders.It is natural to aim finding a low spread forex broker as this will imply the forex broker will be charging you less per trade /volume and allow for more profit. Charges can be either in a combination of a commission and bid-ask spread. There are several sides that provide forex spread comparison lowest spread forex broker for the instruments you wish to trade.
You need to check how reliable the FOREX broker is. This can be achieved by observing if it is a regulated FOREX Broker the competent authorities that is supervised under (eg FSA,CYSEC etc.) and if it is a member of the Investor’s Compensation Fund. A regulated and supervised broker will be more careful and more strict in offering the best service for its clients. It will avoid engaging in unlawful or any type of behaviors that will potentially hurt the client.
Check how much or how little Leverage a broker can offer you. Quite a lot of FOREX Brokers can offer 1:400 leverage while a few can offer over to 1:1000. Even though trading with a higher leverage is riskier for a newbie trader it is best to select to have available the highest possible leverage as it reduces the required margin. Click here to see the relationship between leverage and margin and how leverage reduces the required margin.
Execution Type/ Speed
Execution is quite an important element in trading. Regarding the Speed it is obvious that you would want the execution to be as fast as possible. Regarding the type there are two types of execution. It is
Instant Execution (Re-Quotes): This type of execution is common in market makers. You place a trade and if it moves a given amount of pips in your favor by the type the broker receives it, the broker may re-quote you. A pop up window will appear asking you to accept or reject the new price the Forex broker is quoting you. This can be frustrating as it delays your execution especially in fast moving markets where several re quotes appear.
Market Execution: This type of execution is offered by ecn forex brokers. In this type there will be no Re-Quotes however if market price has moved in your favour in the few seconds since the time you had send your order you may be instantly executed on the new market price that will be worse than the price you initially requested. This is called slippage.
Which is best: Even though Re-Quotes may be annoying as you would want your order executed instantly it may protect you from the slippage that can occur in Market Execution. This can be more obvious when you place an order right after an important announcement. Clearly you would prefer to be given the choice whether or not your order is to be executed at a 15 pips worse price (Instant Execution) rather than this to be done without your consensus (Market Execution). If you do not intend to trade during volatile times and want to avoid Re-Quotes you can go for Market Execution.
It is also worth testing what is the order rejection policy. Unless there is a substantial reason for a broker to reject your order the broker may not be serious.
A lot of the times Forex Brokers you offer you so called forex bonuses or other types of forex rebates and promotions in order to lure you into trading with them. Though forex bonuses and rebate promotions can help your trading by improving gains or increasing margin sometimes all they do is pointlessly increase your leverage or imply trading conditions that make it nearly impossible to withdraw gains or even nullify gains. Check this article regarding how to get the best forex bonus.