The Top 4 Considerations for Finding the Best Forex Broker for Newcomers to Forex Trading
Without a doubt, forex trading is one of the simplest—if not the best—ways to make money online today.
However, there are difficulties when we wish to begin forex trading, particularly for novices.
The top four elements to consider are described below if you want to choose the best ecn brokers list for beginners in forex trading.
Registration and Prior Events
Of course, dealing with “forex scams” is something no trader wants to do. For this reason, you need to confirm that the broker you’ve selected is authorized to do business. Look into the broker’s registration status with the relevant forex regulatory bodies, such as the National Futures Association (NFA) for brokers situated in the United States or the Commodities Futures Trading Commission (CFTC) for brokers based in the United Kingdom.
Examine the history of the forex brokers because most of them that are successful in business have already earned the clients’ confidence and trustworthiness. You can find this by searching online for forums that are talking about that certain broker.
As a forex trader, you don’t have to pay your broker a thing because they get paid through spreads when you start trading. Your forex broker will collect spreads as you trade, whether you are profitable or not. Depending on the broker, spreads could be as high as 10 pip or as low as 1-2 pip. Checking whether your forex broker uses large spreads on client accounts is therefore crucial. A suitable forex broker should employ spreads of 2 pips or less.
Easy to Use Trading Platform
The majority of brokers are quite intricate and loaded with several trading tools. The novice is frequently bewildered by this since he does not know where to begin or how to do it. In order to make order execution simple, quick, and orderly, it is advisable to use brokers with a basic trading platform. This is the reason I prepared a review on how to pick a forex broker ecn brokers list with an easy trading interface.
Getting better with practice
To reduce your chance of financial loss as a newbie on the forex market, you shouldn’t immediately start live trading with real money. To see how you will be able to function and apply your talents in a genuine live trading account, you should practice trading. For this reason, you must pick a broker who provides demo trading with virtual money in the account. Even while the majority of brokers offer demo trading, not all of them give the traders the necessary amounts for practice.
A trading platform on which you may manage your account is a crucial component of the brokers’ services. Although many brokers use the MetaTrader 4 (MT4) platform, many more have their own platforms with graphs and charts. It is crucial for your comfort that the platform satisfies your control requirements and that all operations are intuitive.
You should always be able to access all the information you need:
- A list of your open positions
- a list of your closed positions
- Overview of the account usage for margin, expressed, for instance, in percentage
- Account Statement
- Overview of the premium or SWAP costs
- Try out a few different programs to discover which one suits you the best. By first registering for a demo account, you can examine the program’s dependability. You lost time and money due to a poorly chosen and incorrect program.
It’s also crucial to know what kinds of orders your broker will accept. If you can concurrently open the same currency pair in two opposite positions, such as one short position and one long position. Or, if you can split your position in two, you can close out one side while keeping the other in play. Although it may appear that these factors are unimportant and not worth worrying about, they are crucial to your satisfaction and should be taken into account when making decisions.
Orders with a “STOP” and “LIMIT” guarantee
Based on how they handle your trades, brokers are split into a few main categories. Either they handle them within their own system, they send them to the interbank market or to other market participants, or they deal with them there. Since the first group of brokers, also known as “dealing desk” brokers, do not guarantee the mentioned order, it looks that after you type an order to sell or buy currency, the prices will be re-quoted, or worse, they will deny entry for your price.
Leverage, spreads, and fees
One of the main ways that brokers make money is through sales commissions, also known as spreads, and having the highest spread possible is obviously their goal. If we take an example of EUR USD, the spread is 2 pip, and the current BID and ASK prices are 1.2875 and 1.2877, respectively. As a result, you buy and sell at the ASK BID, while the broker buys and sells at the BID ASK. It makes sense and has a purpose. However, brokers continue to make an effort to have the spread as wide as possible; intense competition compels them to do so. Let’s quickly review the standard spreads for various currency pairs:
- 3-5 pip (great to good condition) GBP/USD
- 3-5 pip CHF/USD [great to good condition]
- 3-5 pips [excellent to good condition] on the EUR/JPY
- 2-4 pip (great to outstanding condition) JPY/USD
- 4-6 pips [excellent to good condition] on the CAN/USD
- Anything above this range needs to be handled carefully and with caution.
Margin and Leverage
One benefit of trading forex is leverage. But if you interpret it incorrectly, it could work against you. Utilizing leverage enables you to manage or control a larger sum of money. In other words, you need less margin the more leverage you have. But it’s important to wield leverage sensibly. Greater leverage can be useful, but only if you can manage it. Find out what leverage options your broker provides. If you keep your investments overnight, you should also evaluate the size of rollover costs.
The discrepancy between the expected transaction price and the actual entry price is known as slippage. You can run a test program on your sample account to determine how quickly your Forex broker processes your order after you press the buy or sell button.