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Archives for April 2018

What To Consider When Choosing A Broker?

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What To Consider When Choosing A Broker

When looking for a new broker, it is essential that you keep several factors in mind. It is irrelevant how much experience you have as a trader, these few points remain the same for experienced traders, professionals or new comers.

 

Regulation

It’s hard to believe, but there are still many unregulated forex brokers out there still. Different countries have different regulatory bodies. In Australia, you must look for a forex broker which is regulated by the Australian Securities and Investments Commission. This is the regulatory body for Australia,

 

Regulation is important because it provides traders with an extra level of protection over their account. Regulation by the ASIC means that they money in your account is secure, that the broker is well capitalised, under strict supervision and that you have avenues to go down and resources should things go wrong.

 

ECN Broker vs Market Maker

Maker makers and ECN brokers have very different trading models. Generally speaking market maker forex brokers employ a business model whereby they trade against their clients. Therefore, when the client loses the broker wins and vice versa. This creates a glaring conflict of interest as the market maker forex broker essentially need their clients to lose.

ECN brokers operate differently. They make their money from the cost of trading, usually a small commission is charged. This means that for ECN brokers it is almost irrelevant whether traders win or lose trades, these brokers are more interested in traders trading. With this in mind, you could argue that ECN brokers would actually prefer their clients to be winning traders, because this way they are more likely to stick around and continue trading.

 

Costs

Each time that you trade you will have to pay. This could be through commission charge or through the forex spread. With this in mind you may seem obvious to look at costs when choosing a broker. However, do also keep in mind it could be worth sacrificing a seemingly low-cost broker for increased reliability. For example, if a broker advertises low transaction costs, but then you find your trades are always being slipped on entry or exit then your broker could actually be more expensive than a broker which has slightly higher prices.

 

Platform

Online forex trading occurs via a broker’s platform; therefore a user-friendly trading platform is a must, in addition to stability. If the broker offers an MT4 account, then you are also onto a good thing. The MT4 platform is considered the standard in online trading platforms it is probably the most popular forex trading platform in the world; that many people can’t be wrong!

Other platforms, such as a mobile platform or even the MT4 mobile platform as well can be very useful if you know you will be checking trades whilst on the move.

A good idea is to check out a broker’s platform through a demo trading account before opening a live account and funding it. This will give you a good idea if you find the platform user friendly or not.

 

Filed Under: Money Tagged With: broker

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