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How to choose a regulated broker?

How to choose a regulated Forex broker?

If you are a beginner in Forex market, then your training in trading should start with the question, who are brokers, and their functions in the financial markets. A broker is a financial company that provides an opportunity to trade foreign exchange instruments, metals, raw materials, and stocks to everyone. Brokers carry out all their clients’ trading operations, called trades, the essence of which is to buy or sell specific financial instruments. Choosing a broker is the first of the dilemmas faced by novice traders on their way to profitable Forex trading.

So, to choose a forex broker, do the following:

Step 1. Determine the characteristics that are beneficial to you

Minimum deposit.

To start trading, a trader should have a certain minimum amount of money in his trading account. Therefore, a low minimum deposit or its absence can play an important role when choosing a broker.

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Spread and commissions.

Spread is the distance between the ask and bid price of a currency pair or other assets. The spread can be fixed or floating. If you are not ready to increase your expenses due to high spreads and commissions, choose brokers with minimal spreads and no additional commissions.

Leverage.

In Forex trading, traders often use the service of borrowing capital from brokers to increase income from their transactions. Some brokers provide clients with a maximum leverage of up to 1: 1000 and higher, which allows them to increase the transaction volume, but in the same proportion, increase the level of risk.

Minimum trade (lot).

A standard lot is usually 100,000 currency units. If the broker in the trading conditions indicates the minimum transaction value of 1 lot, the transaction volume on the client’s account cannot be less than 100,000 currency units. One currency unit is 0.0001 lots. Thus, if the broker’s minimum lot is 0.0001, then the minimum transaction will be ten currency units, if 0.001 – 100 units, 0.01 – 1000 units, 0.1 – 10,000 units. Take note of this indicator before deciding on the choice of a broker.

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Account types.

The types of accounts that the broker offers to its clients deserve separate consideration. Usually, the standard set includes:

  • Demo accounts.
  • Standard real accounts with Instant execution / Market execution modes.
  • ECN accounts are designed for professional market speculators.

It will be essential for beginners to have such a group of accounts like cent accounts in the broker’s line (they are also called mini or micro accounts).

Withdrawing money from the account.

Many traders stop at a particular broker only after they are convinced that the withdrawal of funds from the accounts of this company meets their requirements and expectations. The broker has several ways to withdraw funds from the account adds to its attractiveness in the eyes of traders.

Step 2. Find out which regulator controls the broker

You must need to choose a regulated Forex broker for a secure and safe FX trading, pay attention to whether appropriate supervisory organizations monitor its activities. You need to be sure that the broker who is executing trading orders on behalf of traders meets all the regulatory authorities’ requirements. Most European brokers are regulated by structures such as the Financial Conduct Authority (FCA, UK), the Federal Financial Supervisory Authority (BaFin, Germany), and the Cyprus Securities and Exchange Commission (CySEC).

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In the event of disputable situations that sometimes arise between a broker and a trader, it will be easier for you to protect your rights by relying on the control over the brokerage company’s activities by official financial regulators.

Step 3. Does the broker have a good reputation? Find out what other traders think about the broker.

A broker’s reputation depends on the quality of the services provided by the company. Parameters such as order execution speed, connection quality, and time of deposit/withdrawal of funds strongly influence clients’ opinion about the broker since they have a significant impact on the profit they receive. Before starting cooperation with a broker, study the views of his clients expressed in different review sites.

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