Picking the Right Forex Broker
When it comes down to picking a Forex broker, the distinctions between the different choices out there can be confusing. Pretty much all of the major brokers have the same currency pairs to offer you, and their spreads are also remarkably similar. So, how do you differentiate between the different brokers?
Start with these big things, of course, but then work your way down to the littler things. For example, if a broker has huge spreads, it’s going to be very difficult to make money. The bigger the spread, the more the pair has to move before a profit can be made, so obviously this is the most important thing that you need to look at. The truth, though, is that even within the same broker, spreads are not static. The EUR/USD might have a 6 pip spread, while the USD/JPY might have a 5 pip spread. This is normal. It’s even normal that this occurs one day, and then the next, the EUR/USD is at 5 and the USD/JPY is at 6. Spreads are determined by the broker and the demand they are seeing for certain trades. This is how brokers make money, so they will manipulate spreads slightly in order to keep themselves profitable, too.
All of these things are realities of the trade and are not going away soon. There’s no point in worrying about them, but rather, you should be compensating effectively for them. Instead of these things, look to the things that really matter. For example, does the broker allow taking multiple positions with the same currency pair? Can you hedge without issues? This latter point is especially important if you plan on using the Advanced Loss Recovery strategy since this relies almost exclusively on hedging, sometimes in multiple instances on the same trade, before your positions will be covered. If you take away these strategies, you are severely limiting your capabilities as a trader, and this means less money in your pocket.
In other words, the more choices you have available to you, and the more customization tools you have at your disposal, the better off you will be. Choices don’t mean that you have to use everything, but you will have a better chance of finding the perfect thing to help you become a better and more efficient trader. The ability to use MetaTrader 4, or advanced trading robots, for example, is a good place to start. This helps you to automate things and consolidate your trading. Saving time in this way will let you make more trades–and more trades equals more profits if you are doing it right.
Some of the brokers out there are committing fraudulent activities, too, so this is something you need to be aware of. Most Forex brokers do not (and should not) charge for things like stop-loss points. Most stock brokers do, but this is a completely different type of trading and the brokers involved are completely separate entities. Their policies are not the same, and you should not let this confuse you. Do not be fooled, and do not put yourself in a position within this market where you have to pay extra fees for things that you do not need to.
Finally, when selecting a broker, look at customer service policies. If a broker is willing to speak with you on the phone and walk you through the deposit process and even explain how to use their demo software to you, you’re probably in good hands. A good broker cares about their clients, even if they are small time clients and do not trade with hundreds of thousands of dollars. This is just a good business policy, and you deserve to have this on your side.