Compliance with Regulators
A reputable broker should be a member of the National Futures Association (NFA) and must be registered with the US Commodity Futures Trading Commission (CFTC) as a Futures Commission Merchant and Retail Forex Dealer.
A fancy or professional website doesn’t always mean that the broker is an NFA member or is under the regulations of the CFTC.
You should also look at the different account detail that the broker offers.
When it comes to leverage and margin, forex participants have access to a variety of leverage amounts depending on the broker, such as 50:1 or 200:1. Leverage is a debt extended to margin account traders by their brokers.
When it comes to commissions and spreads, the broker makes money through commissions and spreads. A broker that uses commissions may charge a specified percentage of the spread, which is the difference between the bid and ask price of the forex pair.
On the other hand, many brokers say that they charge no real commissions, but they make money with wider spreads.
Deposits and Withdrawals
Each broker sports specific account withdrawals and funding policies. Some brokers may allow account holders to fund accounts online using a credit card, via wire transfers, PayPal.
Withdrawals can be typically made by check or via wire transfer. There are times when the broker charges fees for either service.
Currency Pairs Offered
While there are great deals of currencies available for traders, only some of them get the larger slice of the trading volume, and therefore, these majors get the greatest liquidity.
A broker may offer a large selection of forex pairs, but what’s more important is that they offer the pairs that you are really interested in.
The major currencies are:
- US Dollar and the Japanese Yen (USD/JPY)
- The Euro and the US Dollar (EUR/USD)
- The US Dollar and the Swiss Franc (USD/CHF)
- The British Pound and the US Dollar (GBP/USD)
Forex trading takes place 24 hours a day, so a broker’s customer support service should also be available any time.
Another consideration is the ease with which one can speak with a live person instead than a tedious auto attendant.
When considering a broker, you can give a quick call to get a feel of the kind of customer service they provide.
The trading platform is your portal to the markets. As such, you should be sure that the platform and any software is easy to use, visually pleasing, has a variety of technical and/or fundamental analysis tools, and with which the trades can be entered into and exited easily and quickly.
A well-created trading platform will have clear “buy” and “sell” buttons, and some even have an “emergency” button that can close all open positions at once.