If you are a forex trader, there are over dozens of trading agents and companies in the forex market who would want to take your business over. Take a look at any website that is a source of financial news and within minutes you’ll be taken over by a flurry of internet ads by such forex agents and trading companies. Choosing a broker is one of the most important parts of your trading journey. Read on to learn what to take into consideration when picking a forex trading agent. Know more webtrader
1. Regulatory Compliance
It is very important to know whether your forex trading agent has a good reputation in the market or not. A tempting, flashy website may not be able to tell you clearly whether or not the trading company is part of the NFA or if it comes under CFTC regulation. You can check this by looking at the trading company’s ‘About Us’ page on the website where they generally mention their member number. Also note, that every country outside the U.S also has its own regulatory body. Factor in the safety of your funds and your trading agent’s integrity. Please make sure your trading account is registered with a regulated trading company only.
2. Account Features
Every forex agent/ trading company will bring you different account offerings. These are the four major things that one should use as yardsticks when comparing trading agents:
- leverage and margin
- commissions and spread;
- initial deposit requirements
- ease of deposits and withdrawals
Leverage and Margin
While this will vary and depend on the trading company or agent you pick, as a forex trader you will be able to access leverage that will reflect in your margin account. Leverage could be both a bane and a boon. If the positions are favorable your profits will be magnified but if the trades aren’t in your favour, it may mean that you could incur a much greater loss. A trader should be careful when using leverage.
Commissions and Spreads
A trading agent/company that charges commissions could take a particular percentage of the spread. Spread is essentially the difference between the bid price and the ask price of a forex pair. Several brokers do not charge commissions but earn money by keeping the spreads wider. Understand how your trading company/agent earns and then shop around for the right one.
Generally, forex accounts can be funded by adding a minimal initial deposit amount which could be as low as $50. If leverage comes into the picture then the buying capacity with the same capital increases manifold. It is a key reason why forex trading attracts several new traders. Many trading companies will allow you to have standard, mini and micro accounts with different initial deposit requirements.
Ease of Deposits and Withdrawals
Every forex trading agent will have a set of specific account withdrawal and funding policies. Several agents might even let account holders add funds to their accounts using credit cards, ACH payments, wire transfer, bank check, or business or personal check. While withdrawals can be done through checks or using wire transfer, your trading agent could charge a fee for both deposit and withdrawals.
3. Currency Pairs Offered
Though there are several currency pairs that you can trade in forex, it is only a handful that dominates the market since they have a lot of liquidity. The major pairs would be:
Your forex trading agent can allow you access to a wide selection of forex pairs but the one who is right for you should offer the pairs which you want to trade.
4. Customer Service
Forex trading happens 24 hours a day from Monday to Friday. Your trading platform should have solid customer support that you can reach at any time. Observe if it is easy to get help in person over the phone or not. Call your trading agent to assess what kind of customer service they provide and what the wait times are like.
5. Trading Platform
The trading platform is the portal through which you can access the forex market. Typically, traders must try and ensure that your trading company’s platform comes with the right set of software. It should have both the technical and fundamental analysis tools required and facilitate easy entry and exit of trades.
How does a Forex account work
A forex account refers to the account that a trader will have with a retail forex trading company. Though forex trading accounts can have many forms, the first one that you will open is generally a forex demo account.
A trading demo account is the kind of account that trading platforms offer. It allows potential customers to become familiar with trading platforms and practice trades before actually investing money via a live account.
How does a demo account work?
Demo accounts gained popularity after online trading came into the picture. A demo account lets users purchase and sell assets via paper trading but ensures that the same can be tested out in real, live market solutions. Investors should play around in their demo account and familiarise themselves with the account, the different market orders, etc, before diving into the real, market solutions.
Demo Account to Forex Account
Once the trader has experienced demo accounts offered by different trading agents and companies, the next move is to open a funded account. Some popular funded accounts are mini accounts, full accounts and managed accounts. Mini accounts work in a similar way like full accounts but the currency gets traded in lots of 10,000 and not 100,000. It makes it easier to have low compulsory initial deposits and allows for more customization of risk management strategies.
Now that there are a number of forex trading agents around, the cost of managing accounts has also reduced. In general, there will be no set-up fee and the user might be charged on a per-trade basis depending upon the size of the trading lot.