People often ask how to choose a good Forex broker. In fact, the internet is filled with articles explaining exactly how to go about finding the best broker. The problem is that most of these articles are wrong. When you strip most brokers back, you find that most of the differences between them – what makes them “better” than others – is little more than marketing and window-dressing.
Jeffrey Cammack, COO at TradeForexSA, a South African Forex broker comparison portal, clarifies further: “Assuming you have a list of well-regulated Forex brokers, there are only four things that you really need to think about: How much you can afford to lose, does a broker publish its fees, how much are those fees, and how easy is it to withdraw your money. That’s it really.”
Some people may prefer a specific trading platform or want to trade a particular currency pair that isn’t available in many places. But if you are just interested in profitable trading, these four factors are the only important considerations:
1. What are you willing to spend on Forex trading (or more accurately what are you willing to lose)?
This should be a carefully made decision. Forex trading is not gambling for those with the requisite financial knowledge. But all traders are going to have losses, the markets are too volatile to profit every time. Never trade with more than you can afford to lose. Once you have a figure in mind you can narrow down your list of well-regulated brokers, only keeping those with trading accounts that have a minimum deposit that works for you.
2. Do the Forex brokers on your list publish their spreads and/or commission?
This is of the utmost importance. The spread and/or commission is going to be your main cost and you need to know what, on average, you are going to be spending. Forex brokers that do not publish spreads or are non-transparent (e.g. only publishing the minimum spread, or only publishing the spreads on their most expensive account) often have something to hide. And what they are hiding is rarely in a trader’s best interests, as we have seen recently with the JP Markets scandal.
3. What is the cost per trade on your chosen account?
This requires the answer to question 2 to be in the affirmative. Once you know the spreads and commission on an account you can get a basic cost quite easily for each currency pair. Many of the larger Forex brokers offer free trading cost calculators – using these calculators you can find the lowest cost broker that fits your deposit requirements. Remember that just because a broker charges commission does not mean they will be more expensive. Brokers with commission offer direct market access and a have much tighter spreads – in fact, commission-based brokers often come out cheaper.
4. How long does your broker take to process withdrawals?
All the above is well and good, but if a Forex broker takes forever to process your withdrawals, or charges hidden fees, you are going to be left frustrated and out of pocket. Always read the withdrawal small-print: Some brokers will have free withdrawals for e-wallets and charge for credit cards, some brokers will charge for credit cards and for e-wallets, the best brokers will have free withdrawals across the board. Many brokers will charge for bank transfers, but these are also slow and will often incur a charge from your bank too.
Once you have gone through this checklist, you should be in a good position to select a trustworthy, low-cost broker that will not charge you outrageous fees or delay your withdrawals. This will leave you free to focus all your energies on turning a profit.
Disclaimer: This article contains sponsored marketing content. It is intended for promotional purposes and should not be considered as an endorsement or recommendation by our website. Readers are encouraged to conduct their own research and exercise their own judgment before making any decisions based on the information provided in this article.