The Forex market is the world’s largest financial market in terms of volume, even if levels may have fallen from the highs of a few years ago when $6 trillion would change hands in a single day. Thus, with the continued popularity of currency trading, there are now a wide variety of online platforms and websites offering their forex trading services. However, not all forex trading platforms were created equal, and there are some which will provide the user with more amenities than others.
With a such a large number of brokers and different trading platforms to choose from, it is wise to have a look at a handful of the most important metrics to consider when choosing an online Forex broker:
It is extremely important that the broker is able to offer adequate levels of security. This will generally be offered by brokers through SSL encryption (Secure Sockets Layer). All technical jargon aside, this is the same encryption software which banks and other financial institutions employ. Whether the broker offers this level of protection or not is normally displayed at the bottom of the homepage.
2. Customer Support
The levels of customer support offered by the broker can a useful barometer of the reliability of their website and services. Is there only a static “info@” contact email available or are there options such as telephone contacts and a live chat widget? Those platforms that offer multiple avenues of customer care can often be seen as being a more practical choice.
3. Regulatory Bodies
It is paramount to always use a trustworthy and reputable broker that is regulated by a respected authority such as the Financial Conduct Authority in the UK and CySEC in Cyprus. As a general rule, brokers who are regulated by a trusted regulatory body will clearly state this fact on their website.
4. Trading Spreads
One of the critical determinants of profits and losses in forex trading revolves around the amount of commission that the broker will charge per trade. This is often referred to in units known as pips. As a rule of thumb, lower pips will usually equate to lower commissions taken out during each trade. Still, other brokers could choose to charge no pip-based commission and instead make a profit when trading wider spreads. It is also worthwhile noting that some brokers will also display extremely tight spreads when dealing with common pairs such as the dollar/euro or the pound/euro.
5. Initial Deposit Amounts
One of the most attractive characteristics of Forex trading is that traders are not normally required to place a great deal of money down to open an account (in contrast to a commodities position such as gold). One of the signs of a reputable forex trading platform is one which will provide numerous entry levels based upon the needs of the trader.
6. Account Flexibility
With the number of different brokers available to them, Forex traders should be able to open up the right account for whatever amounts they wish to trade. While often called by different names, standard forex account options can include:
7. Depositing and Withdrawing Funds
When determining how capital can be deposited or withdrawn from the trading account, some of the most trusted payment methods include PayPal, TransferWise, credit cards and direct deposits. As all of these (and others) will employ SSL encryption, the trader’s personal details will remain secure. It is also wise to be aware of the withdrawal fees that will be taken by the broker. These will differ from broker to broker and comparing these charges will enable the potential day trader to better manage their potential profits and losses.
8. Currency Pairs
Many Forex brokers will provide traders with a great number of pairs to choose from. While standard pairs such as the GBP/Euro and Dollar/Euro are normally present, others including the Dollar/Yen should also be covered. The reason for this is that a larger number of pairs will help one to diversify a portfolio and avoid volatility within a certain currency.
9. The Trading Platform
In terms of functionality, the type of trading platform employed can be of the utmost importance. For example, how easy is it to track pairs in a real-time scenario? Are the account balance and any profits/losses visible within the main portal? How often is the site updated? Are “buy” and “sell” options clearly marked? The user must be completely comfortable with all aspects of navigation. Otherwise, an incorrect trade could be made, or an opportunity may be missed.
10. Demo Accounts
Many Forex brokers will offer demo accounts as an excellent way for traders to familiarise themselves with, and understand the functionalities of, their platform. While most of the larger Forex trading brokers will provide demo accounts as an option, it is wise to note that not all features (such as advanced analytical tools) may be available to trial.
While each of these features needs to be considered alongside all of the others, there is no one single metric which can determine how reputable and reliable a Forex trading broker will be.
Other variables such as how long the site has been in operation, as well as its recent financial performance, should be taken into account, as well as the level of protection offered by the local regulator.