Forex trading has its ups and downs. Being the world’s largest financial market, it’s only natural that there would be many players involved. The problem with having too many choices is settling down for a single option. You can never run out of Forex brokers who have or claim to have experience and provide the best trading platforms. What makes it even harder is they all have resumes to match it. Even if you rely on reputable publications that give you a breakdown of each trading company, you will still be left with quite a handful by becoming a victim if you are not sure what you are looking for.
Your best chance is to learn a few tricks and tips that will help you navigate this financial jungle. With a little knowledge of some of the things that make a good broker and how to get value for your money, you can easily pick out your preferred platform from a 5-page list.
Since Forex trading is not necessarily a walk in the park, there are quite a number of tricks that require mastery. You can learn them slowly as you continue to trade but these three will have to be at your fingertips from the moment you start:
Licensing
Basically, each broker has to be registered to a regulatory compliance body depending on the country they operates from. In the United States, a broker has to register to the National Futures Association (NFA) as a member. NFA is an independent organization that ensures the integrity of the market and the players involved are protected. The players in this case are the traders, brokers and investors. It also makes sure that each of these parties plays their part responsibly.
The NFA gets its mandate from CFTC. CFTC, or U.S Commodity Futures Trading Commission in full, is the government body that regulates the market. Even though it works for the government, it is completely independent since it only serves as an agency.
Educational and Trading Support Materials
No one wants choose an FX company that will leave them in the dark as they struggle not to lose their hard-earned cash. Before you settle on a company, make sure that they have a vast supply of educational materials to get you started and make you fully understand the market. A good broker will give you articles, webinars, tutorials and info graphics to help you find your way. They can even go the extra mile and offer in-person support if your problem is somehow personal and it doesn’t fall in the category of regularly-encountered problems.
Once you are educated, you will need plenty of analysis tools to help you study the market and know when to and when not to trade. Currency pairs fluctuate in a matter of seconds and if you didn’t analyze well, you will lose a fortune. You need to understand which currencies are the most traded and why. Once you have a clear picture, you have to look for a company that emphasizes on these currencies and has the proper supporting analysis tools and educational resources. You can always conduct a little research of your own on the side just to be extra safe.
Account Deposit, Commission and Spreads
This is what determines whether you get paid or not. These three money terms will help you gauge the kind of charges that apply in the various Forex trading companies. It is always advisable to look for a platform that allows you to invest the smallest amount of money possible. This heavily reduces the risk of you losing your life savings on the first go. A good example is OANDA, a world class broker that has no minimum deposit. You can invest as little as you prefer.
The company you choose will earn either through spread or commission. The spread is dictated by the broker and if it is high, you get the shorter end of the stick. A low spread puts more money in your pockets and the broker also gets their fare share. Some companies apply commissions on the number of units you trade. When it comes down to it, choose the one that offers one of the two, or a perfect balance of each. Forex.com and OANDA don’t charge any commission so they rely on spreads.
