Did you know that, according to Investopedia, the foreign exchange market is the largest financial market on the globe? Its daily volume is $6.6 trillion, making its daily volume even larger than that of the stock market.
If you’re interested in making some money through the forex market, then you’re probably looking for the right forex broker and trading platform.
However, with so many options available, you might not be sure about how to get started.
Because it’s such an incredibly competitive market, there are so many forex brokers and trading platforms out there. It can be stressful to make this decision, having to figure out the right fit for you.
That’s why we’ve put together this article. In it, you’ll learn about how forex trading works and what to look for when choosing a trading platform and broker.
Finally, you can start trading forex and making money. Read on to learn more.
How a Forex Broker Works for You
When a forex broker trades to make you money, they’re taking advantage of exchange rates between different currencies. When currencies fall or rise in value as compared to one another, forex brokers do what they can to predict these currency value changes.
When they do this, they trade accordingly, buying or selling currencies so that you end up with more money.
This type of investing is riskier than other types, which means that you can make big gains—but you can also experience great losses.
For this reason, it’s best not to engage in forex trading yourself. Instead, you should choose a forex broker and trading platform. But how do you choose the right one?
Choosing the Right Forex Broker and Trading Platform
When choosing the right forex broker, you need to think about transaction costs, security, execution, customer service, and deposit and withdrawal processes, and more. Additionally, you need to make sure that they’re using the right type of trading platform.
When you work with a forex broker, you will have to pay for transaction costs. Whenever your broker puts in a trade for you, you’ll be paying for either a commission or the spread itself. Many people tend to look for cheaper forex fees.
However, this isn’t always a great way to go. If the fees are lower, then chances are that the broker might not be as good at their job.
To make sure you aren’t paying too little for a low-quality brokerage service, but not more than what’s reasonable, you need to take a step back and look at what usual transaction costs are for your trading type and spreads.
Once you have an idea of what the average costs are, you can find a broker with transaction costs that work for you.
Security is one of the most important aspects you have to consider when choosing the right forex broker for you. If you end up hiring a forex broker who isn’t secure for you to invest with, then you could end up losing all your money.
Fortunately, you can check your forex broker’s credibility pretty easily. There is a lot of regulation in the forex world, so all you have to do is check your country’s regulatory agency.
In the United States, the regulatory bodies are the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA). In Australia, you’ll want to use the Australian Securities and Investment Commission (ASIC).
In the UK, you’ve got the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA).
In Germany, there’s the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN), and in France, the Autorité des Marchés Financiers (AMF). In Switzerland, you have the Swiss Federal Banking Commission (SFBC).
Finally, in Canada, you can check about your potential forex broker with the Investment Information Regulatory Organization of Canada (IIROC).
If your potential forex broker isn’t a member of one of these bodies, then it’s as bad as them having no financial education. Choose another forex broker instead.
When it comes to execution, your broker needs to get you the best possible prices. When market conditions are normal—when there aren’t any surprise events or big news releases, and liquidity is normal—your broker must fill you at market price.
If they don’t reach the market price, they should at least reach a price that’s close to it. This market price is the price you see when you click the “sell” or “buy” button.
The speed of trades should also be fast. If your broker doesn’t complete trades for you quickly, then you could end up losing quite a lot of potential money made from a trade.
When you’re first speaking with potential forex brokers, they might seem like they’re going to be putting all their time and effort into making profitable trades for you. However, when problems come up, they might suddenly not be around to help you out.
However, a good forex trader should be available for you both when it comes to offering the help you need regarding trades as well as potential technical problems.
When choosing your forex trader, ask them for references from past clients. You should also look at reviews of their customer service.
Have customers been happy with how soon the broker gets back to them? Do they solve their problems quickly? If not, you should consider going with another broker.
Deposit and Withdrawal Processes
A good forex broker will make it easy for you to make deposits and withdrawals of the earnings you’ve made from forex trades. The reason for this is that, when the money is with them, they should only be using it for completing trades.
There is no other reason that they need to hold on to your funds. So, if you decide that you want to take out your money, it should be easy to do so.
If you approach a broker about their services and the deposit and withdrawal processes seem complicated, this is a red flag. This broker might want to hold onto your money for a dishonest reason. Additionally, it isn’t very professional.
A Good Track Record
You want a forex broker you can trust, right? One of the best ways to know that you can trust the broker you hire is if they have a good track record. Make sure they have years of experience, as well as successful clients and trades.
If you’re nervous, you can always go for a larger brokerage instead of an individual-run one. These reputable institutions have hired brokers who have a lot of experience and education.
Think About Account Minimums
Many forex brokers won’t require you to invest a certain amount of money. However, some require an account minimum. Sometimes, this amount can be as much as $500. Depending on your financial situation, you might not be able to afford these brokers.
Even if you do have the account minimum, you’ll need to put in a little extra so that there is actual money in your account that they can trade.
High-quality brokerages offer free resources, such as glossaries, video tutorials, how-to guides, and live webinars. This way, you can learn about trading strategies and have a bit more control over how your money is traded.
When you start working with a broker, ask them about these features. Will they help you understand them and learn a bit more about trading? This is a good sign.
The Trading Platform
When your forex trader is trading for you, they’re completing all these trades on a specific trading platform they use. The trading platform should be stable and user-friendly so that it’s easy to complete even the most complex of trades on it.
A good trading platform will have several useful features. For example, it should give you all the information needed to trade with confidence.
It should also include charting tools that are technical and easy to use. A free news feed can be another great feature.
Need More Information?
Now that you’ve learned about how to choose the right forex broker and trading platform, you might need additional information. Maybe you want to learn about the different forex brokers available. Or maybe you want to learn about other ways to invest your money.
Whatever information you need, we can help you. At ForexBroker, we’re experts when it comes to forex brokers and platforms. We also offer reviews of them. To learn more about how we can help you, contact us now.