Learn how to do due diligence and choose the best forex broker for your trading journey…
There are numerous online forex brokers vying for you if you trade on the foreign exchange market. Identifying your trading style and financial objectives is a need before selecting a forex broker as every broker that offers forex investments has benefits and drawbacks. In this post, we will be showing you the key features to look out for when doing your due diligence on the best forex broker for your trading journey. In the end, we would also recommend our best broker for forex trading.
Who is a Forex Broker?
We must briefly outline the market in which brokers operate in order to comprehend what a broker is and what they perform.
The currency market is decentralized, so unlike, say, the New York Stock Exchange or the London Stock Exchange, there isn’t just one exchange through which all transactions pass. The interbank system, a global network where financial institutions transact directly with one another, is the foundation upon which the FX market is based.
Retail traders must utilize a broker in order to access this network. Brokers provide services like leveraged trading and allow traders to buy and sell currency pairs. Brokers profit from the spread, which is the difference between the buy and sell prices, as well as other charges like commission.
Various Types of Brokers
How a broker conducts business on the foreign exchange market is among the most crucial things to understand about them. See some of the different categories of forex brokers below:
Market Makers assume the risk rather than hedging their clients’ positions with liquidity providers. This implies that the broker would profit from a client’s loss and vice versa.
For STP brokers, when orders (trades) are completed, there is no manual broker intervention (STP, or straight-through processing). Making money for the clients is in the broker’s best interest because it encourages more trading and increases customer loyalty.
STP and DMA (Direct Market Access) are related ideas. The main distinction is that STP brokers can directly fill orders while hedging them with liquidity sources. DMA, on the other hand, entails that orders are delivered directly to the market and filled in accordance with the pricing that the liquidity provider receives.
To automatically match buy and sell orders, ECN (Electronic Communication Network) brokers employ an electronic communication network.
Why Choosing The Best Broker Is Important
Consider the kind of business you would contact in the event of a trade dispute. This question has two purposes. First, is it a respected business that will investigate a deal where you feel you have been treated unfairly? Second, and maybe more significantly, are its financials disclosed to the public and subject to regulation?
When it comes to how at ease you should feel with your broker, financial transparency and regulation are of the utmost significance. As the foreign currency market has become more volatile, undercapitalized brokers have abruptly closed their doors. Traders can end themselves in a big tangle as a result. Understanding your broker’s financial status will help you determine whether they will be able to withstand the impending FX storms and volatility.
Features of The Best Forex Broker
We like categorizing these features into two categories; Qualitative and Quantitative. Qualitative refers to quality-based characteristics which can’t be quantified, while Quantitative refers to those features which are number-based (quantifiable).
Qualitative Features
Regulatory Compliance
Without a question, the most crucial factors to take into account when choosing a broker are regulation and compliance. An unregulated broker essentially has complete control over the money belonging to its clients. You should be extra cautious when dealing with any unlicensed brokers because they can be nothing more than an online scam.
A reliable broker’s actions should always be overseen by a government agency set up to safeguard and advance the honesty of brokerage activities. Since traders should be safeguarded from both fraud and manipulation, any abusive actions related to the sale of futures and options should be prohibited. The “About Us” section of the broker’s website typically contains a list of these qualifications.
Nearly every nation in the globe has organizations that function similarly to these trade associations and regulatory agencies. Traders should constantly do their homework and seek these credentials, depending on where their broker is headquartered. In this regard, it’s also important to look into the broker’s license year, as it may have some bearing on the broker’s overall reputation and track record of business operations.
Customer Support
It’s possible for things to go wrong with any service, whether it’s a platform outage, a price error, an erroneous account statement, or another technological problem. No broker is exempt from this, but as a trader, it’s crucial to know that the broker can be reached, that they will be responsible, respond fast to problems and that they will behave fairly. It’s also important to verify if the broker provides service in your native language.
Both novice traders and seasoned investors value excellent customer service. It is the responsibility of the customer support representative to resolve any issues a consumer may have with their broker. As a result, while choosing a broker, it is important to consider the knowledge, abilities, and accessibility of the customer care team.
Instant Execution, Deposit & Withdrawals
The majority of traders value quick execution because it offers more precise pricing in a volatile market. However, it’s particularly crucial for traders who use scalping techniques or Expert Advisors, commonly referred to as “trading robots,” that process numerous transactions quickly. In these situations, trades that are delayed even by a few milliseconds might be expensive. It should be noted that demo accounts, which let traders test a broker’s service, are not always a reliable indicator of how quickly trades are executed in a live trading environment.
It is also crucial to be able to deposit and withdraw money from your broker promptly and effortlessly. The types of withdrawal and deposit options that your broker accepts will determine how this works. The range of these payment options should be as broad and varied as feasible. As many traders claim that it can take up to a week to withdraw when they wanted their funds available sooner, it is also a good idea to examine the withdrawal time. Anytime below 24 working hours is best.
Great User Interface & Experience
It’s not enough to have good functionalities on their platform, a good brokerage platform must also have a great user interface across all devices. In fact, the brokerage platform must have a desktop and mobile version that guarantees users a great experience while using the platform. There should be no reason to find it hard to navigate a broker’s platform.
Reputation
Sometimes trying a broker out is the only way to see if they are the appropriate choice. However, conducting some preliminary research unquestionably helps focus the search. Checking out reviews, debates on trading forums, news releases, accolades, and publicly available financial information can all help you rapidly determine whether the broker you’ve picked is reputable and deserving of your trading business.
Quantitative Features
Margin & Leverage
With the help of a margin account, the investor effectively borrows money from the broker in order to take ownership of larger positions than he could with just his own resources. Traders may employ specialized margin accounts for this function. For example, if an account trades 100,000 currency units and the margin percentage is set at 1-2%, this indicates that the trader must put $1,000 in that trade in order to control a position worth $100,000. Margin accounts have unique dangers as well as unique operating processes designed to lower risk for both the trader and the broker.
Leverage and margin have a clear distinction. Let’s imagine a broker requests a $1,000 down payment for trades up to $100,000. The leverage, which in this example is 100 to 1, is the multiplier by which the deposit is multiplied to reach the maximum trading value. The required deposit amount expressed as a percentage of the allowed trade value is known as the margin. It is 1% here. But the term “margin” as explained earlier, is frequently used in slang to describe the money placed with a broker.
Real Market Prices
A good broker must be operating at the right market prices. They should be able to offer their clients the best price available in the market. A change in price can make all the difference, so this also counts as a key feature to look out for.
Low Spread & Zero Commission
Brokerage fees are the costs associated with the services a broker provides, services that are aimed at facilitating transactions between buyers and sellers. The amount of these fees varies depending on the type of broker and the service that the trader chooses to subscribe to. The best way to explain the problem to ordinary traders is to say that Dealing Desk Brokers just charge spreads, whereas ECN Brokers also charge commissions.
The spread is the distinction between the ask (sell) and bid (buy) prices. The spread is generally advantageous for the trader the lower it is. Because of this, brokers frequently advertise “low spreads.” Another fee to take into account is commission. Many brokers provide a variety of account types with various cost structures to accommodate various trading approaches.
For instance, one account can have somewhat greater spreads but no commission fees for trades, whilst another account might have lower spreads but a different transaction fee. The structure is set up so that traders can select the least expensive account type that will work best for their trading approach.
For traders who open and maintain currency positions overnight, swaps are yet another crucial factor to take into account. Depending on the currency pair being traded and whether the trade is long or short, these types of trades result in costs known as swap rates, which can be positive or negative.
Fees indicate a set payment, but commissions fluctuate based on the supplied financial product and the size of the transaction. This is the main distinction between fees and commissions that all traders need to be aware of. It’s better to find a broker that charges little or no fees and has very low spreads; the lower the better.
Minimum Deposit & Withdrawal
This usually raises issues, especially between big brokers and beginner traders. You would want a broker that has a very low barrier to deposits and withdrawals, especially if you are still getting started or low on trading capital. You wouldn’t want to have problems depositing and withdrawing due to transaction amounts, so check this first before choosing the broker.
Available Trading Pairs
A strong broker should offer a wide range of trading items. Even if a trader focuses mostly on currencies, it’s useful to be aware of other possibilities. For instance, it would be upsetting if traders couldn’t take advantage of a trading opportunity they saw in currencies with commodities simply because the broker didn’t offer that product.
Other Features
Trading Account Options & Risk Management Features
Brokers typically provide a variety of account types to accommodate various traders and trading approaches. The majority will have a “Standard” account, which is equipped with all the tools “everyday” traders need and is created to make trading as easy as possible.
There are also accounts that are designed for professional traders; these accounts may have extra features or different prices. Other options include tailored accounts like the “Swap-Free” account, which is for Islamic traders who, due to religious restrictions, are not permitted to be charged or credited with interest payments, as well as VIP accounts for higher-volume or high-net-worth traders.
The majority of brokers provide free demo account access, allowing users to place trades using fake money in a test trading environment that is similar to the real one. While demo accounts have a predetermined lifespan (usually one month), customers who open live accounts frequently have the choice to use the demo account permanently.
Demo accounts are initially helpful for evaluating the broker’s offerings, price, and service. Later, it can be helpful for trying out new tactics without putting actual money at risk. It’s also important to confirm that the broker accepts all order types that assist traders in risk management. This should at the very least include a take-profit order and a stop-loss order to reduce potential risk on trades.
Trading Education
Brokers frequently provide tools and courses to aid in the development of their clients’ trading abilities. Simple blog postings, e-books, courses, legitimate online academies, and collaborations with expert educators can all fall under this category. Online webinars and live seminars are two additional well-liked methods for assisting traders in their development.
We also have a Forex course that teaches you how to trade Forex from Beginner to pro. You can get the complete course here and get started on the best forex strategies today.
Bonuses & Promotions
Brokers do employ bonuses and incentives as marketing techniques to “sweeten” its product and entice customers. You might want to think about whether a broker of the highest caliber would feel the need to provide such rewards. However, this is not your top priority when on the look for the best broker.
FXTM (Forex Time) – The Best Forex Broker
About FXTM
FXTM is a global forex and CFD broker with its headquarters in Limassol, Cyprus. FXTM was founded in 2011. Through the MetaTrader trading platform and the FXTM Trader App, FXTM provides currency trading as well as CFDs on commodities. All client money at FXTM is held in reputable institutions that are separated from the firm’s assets and are subject to numerous jurisdictions’ regulatory oversight. According to their corporate website, FXTM has offices in Europe, Africa, Asia, and Latin America and has provided services to 4 million clients in 180 countries.
Key Notes about FXTM
- In total, nine criteria (Trust/Stability, Fees, Tradable Instruments, Account Types, Deposit/Withdrawal, Research, Customer Support, Education, Platform/Tools) were taken into consideration when evaluating FXTM.
- We determined that the fees were about typical for the sector. The Advantage account type offers more affordable spreads.
- We consider FXTM to be a reasonably safe broker because it is supervised by two top authorities (FCA and CySEC).
- The well-known MetaTrader 4 and MetaTrader 5 platforms are available to clients for desktop and web use. Customers can also access the markets while on the go thanks to the user-friendly FXTM Trader mobile app.
- FXTM’s performance in the education category was approximately average due to its in-depth articles, instructional videos, and sessions on trading methods with specific examples.
- Demo accounts and a personal account representative are helpful for beginners.
- Custom MT4 Indicators, VPS Trading, and Professional Designations are available to advanced traders, providing access to higher leverage.
What Distinguishes FXTM from Other Brokers?
Customers can select from a variety of account kinds to match their individual trading characteristics. FXTM assigns each client a personal support agent. FXTM sets itself apart by having a dedicated mobile app and being governed by two top regulators.
What kinds of traders work well with FXTM?
FXTM is a good option for traders who are new to the markets because it offers a demo account, dependable customer service, and extensive training materials. Through the Advantage account type, seasoned traders can benefit from MetaTrader’s cutting-edge features and decrease trading expenses.
FXTM ticks all the features we mentioned so far in this post. Get Started with FXTM – The Best Forex Broker Today!
Conclusion
Spend some time choosing a forex broker because a mistake could cost you money. The best brokers will provide extensive resources, affordable trading rates, and access to the global FX market. Even if you start a modest account in the hopes of converting it into a modest fortune through your trading abilities, they will treat your money with care. You will be able to devote more time and attention to analysis and creating forex strategies if you have faith in your forex broker. A trader’s chances of success in the cutthroat forex market might be improved by doing some research before choosing a broker.
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