The growth of the forex industry has given rise to hundreds of forex brokers presently. Given the sheer number of forex brokers, it can get difficult or at the very least confusing to the forex trader to choose the right ECN Forex broker to trade with. Of course, these days there are way too many sites dealing with forex broker reviews that claim offer unbiased reviews and the like. However, forex traders should not base their decisions simply on what they read, but rather take a more individual approach in the process of choosing a Forex broker.
By letting reviews influence your decision, you are indirectly putting your trust in a forex broker based on the information written on some website. This approach can prove quite dangerous as there are lot of aspects that can be releaved only after a trader begins trading with a forex broker over a period of time.
In this article, we present a few facts on how traders need to spend time and research that will assist traders in how to choose a forex broker.
The forex industry started out over a decade ago and initially it was just a few forex brokers who were the true pioneers that began offering online trading to the traders. Given their success, in little to no time, more and more forex brokers came up on the scene, such kind of forex brokers are what we refer to as copycat forex brokers who offer little to no differentiation in the products that they offer.
ECN Forex brokers then came along and changed the game. ECN Forex trading, which was previously only offered to institutional investors was now available to the individual forex traders as well.
Determine your trading style and approach
The first step in choosing an ECN forex broker is to pause and ask yourserlf a few questions.
- What type of a forex trader are you
- What are your preferred trading instruments. Do you primarily trade on forex pairs or is CFD’s more like you?
- How many times a day or week do you trade.
- Do you trade during specific hours or during news releases?
Most forex brokers in an effort to gain a large share of the market usually tend to ignore such aspects. What this translates to is that while your prefer to trade Forex pairs, the broker that you choose is more suited to trading CFD’s or vice versa. The same is reflected on aspects such as the spreads, liquidity providers and so on.
Consider factors such as the trading environment
It makes no logical sense to join a forex broker who for example offers only one type of a forex trading platform, something that you are unfamiliar with. Researching and identifying what type of trading platforms are available is the second important step. If you are not familiar with the forex trading platform, then chances are that you are setting yourself up for a big disappointment and potential losses as well.
Another factor to look into is your prefered base currency to trade with. Why should you compromise and go through the trouble and even lose out on the exchange rate when your Bank, Credit Cards all make use of the British Pound? There are many forex brokers available in the markets today and with just a little research, you can easily identify the forex broker that truly meets your expectations.
Customer service is another important factor that is often put down the checklist. Would it make any logic to wait for over six hours for support to get back to you while you have some serious issues with your orders? Not right! While choosing a forex broker, ensure that the support times matches with your trading times or at the very least, make sure that customer support is offered during your local time zone.
Fees, Hidden terms and commissions
In the excitement to signing up to your ECN Forex broker, never overlook the finer details of the deal. Factors such as commissions charged by the forex broker or any other administrative overheads that come into play during times such as making your withdrawals. The devil is always in the details, so spare some time carefully reading through the terms and conditions of the ECN Forex broker before you decide to start trading with them.
Regulated V/s Non Regulated Brokers
This makes for an itneresting debate as there are valid different schools of thought. However, considering this fact. Forex brokers such as MF Global which was a reputable forex broker licensed by the CFTC went bust due to mismanagement of funds. This fact alone proves the point that regulation in fact has nothing to do in influencing your decision. Truth is that more clients lost money with regulated forex brokers going bust than otherwise. Perhaps one critical factor that traders should look out for is if the forex broker offers segregated accounts. This is an important aspect as it ensures that in the unfortunate event that a forex broker goes bust, at the very least your funds are secured and hence better the chances to get your money back. Also, ECN Forex brokers are usually more robus given the business model that they operate, as compared to Market Makers or Dealing desk forex brokers whose profits is directly dependent on the trader’s profits and losses.
Choosing an ECN forex broker that offers segregated accounts is always better than choosing a regulated forex broker. At the very least your funds are secured and thus gives you a higher chance to get your capital back in case the forex broker goes bust.
A simple way to figure out if segregated accounts are used is to keep an eye on the Bank WIREs, if the same account number is used for both deposits and withdrawals.
Forex trading can be fun but is only for those traders who are more serious and wish to truly take advantage of the forex industry. Follow these simply tips and you are on the right path to choosing the ideal ECN forex broker that meets your needs.