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Forex trading has been perhaps the predecessor of the retail trading boom we have been seeing lately, as many brokerage firms around the world relied on technology to offer access to this huge market while slashing trading costs, facilitating account opening procedures, and expanding the range of instruments offered by introducing innovative products such as contracts for difference (CFDs).
There are many advantages of trading forex instead of other lower-volume instruments. First, the market is open 24 hours a day due to the interaction of multiple time zones. Secondly, this market is highly liquid, with a total of $6.6 trillion in transactions settled every single day.
Moreover, there is a wide range of products that can be traded included the most popular forex pairs such as the EUR/USD or the USD/JPY pairs along with more exotic alternatives involving the fiat currency of smaller countries such as the Norwegian Krone or the Turkish Lira.
These advantages make the forex market highly attractive for both advanced and beginner traders and, in the following article, we will walk you through some of the characteristics you should look for in a forex broker in case you would like to start trading in this fascinating market.
What to look for in a forex broker?
There are dozens of forex brokers around the world. To help you in short-listing your alternatives, websites like brokereviews.com have analyzed the multiple characteristics of these companies to give you an in-depth look at how they work, how much they charge, and what do they have to offer.
That said, if you would like to analyze these brokers by yourself, here’s what you should look for when picking a forex broker.
Registration Process
Since most brokers nowadays rely on technological platforms to provide their services, the first thing that you should expect from a great broker is a seemingly easy and fast to complete the registration process.
In most cases, it should not take you more than a few minutes to open an account, while the identity verification process, a step that most brokers require before your account can be activated, should be completed in no more than 24 hours.
Safety
Forex brokers can be regulated by different entities depending on the country in which the parent company has been incorporated. The best and most well-reputed forex brokers are usually incorporated and regulated by agencies from the so-called “top-tier” jurisdictions, which are countries that have exhibited a solid track record of adequately enforcing transparency and lawfulness.
These top-tier jurisdictions include Australia, the United Kingdom, Japan, and the United States. That said, the fact that your broker is not registered or regulated in any of these jurisdictions does not necessarily mean that the company is a scam. However, you should probably stay away from those that operate from countries that have a bad reputation when it comes to law enforcement.
Trading costs
When trading forex, the cost of trading is usually variable depending on the forex pairs you are trading and your daily trading volume, among other factors. For comparative purposes, it is often easier to compare the costs involved in trading the most popular pairs to analyze which broker is offering the best deal.
The EUR/USD, USD/JPY, and GBP/USD are among the most traded forex pairs and you could compare how much each broker charges for trading these three pairs to determine which provider is offering the lowest transaction costs.
Available pairs
If you are a beginner, you should probably feel comfortable with trading the most popular pairs such as the ones mentioned above. However, if you are an advanced trader, chances are that you would like to broaden your selection of available pairs to include some exotic forex pairs.
Make sure you analyze the pairs that your prospective forex broker currently offers before depositing your money and keep in mind that some providers only offer CFDs for trading forex instead of allowing you to trade the pairs directly.
Trading platform
Trading platforms are a major element to take a look at when selecting a forex broker as you’ll be spending a lot of time in front of a screen analyzing charts and news. The best brokers nowadays offer desktop versions for their proprietary trading systems or support advanced trading software such as Meta Trader 4 and 5.
Withdrawals & Deposits
Finally, the possibility of freely moving your money in and out of your trading account is a big advantage and, with so many options out there, you should pick a provider that offers cheap and unlimited withdrawals per month while deposit fees should be low as well.
Additionally, make sure your broker offers a decent number of channels through which you can deposit money such as credit and debit cards, PayPal, and wire transfers.
This brief guide should help you in narrowing down your picks so you can make the best decision on which broker you decide to go with. Best of luck in your trading journey!
