In this article, you will be able to judge the brokers insights as well as the fair decision on validity and reliability of your FOREX broker. There is a list of certain FAQs that help you before investing your hard earned money in the FX industry.
Before starting with the trade with a broker, you need to ask several questions to yourself:
1)Is this a regulated broker or not?
2)How long it has been a Forex broker?
3)What kind of history they share?
This kind of questions you should ask to your broker before starting to trade because sometimes this kind of brokers may evaporate the market as soon as there is volatility in the market which might cause them a huge loss. Hence checking or revalidating history means checking their reliability in the industry…[dt_gap height=”30″ /]
This constitutes as one of the core objective while choosing a broker, before making any trading decision in certain. You need to understand the financial position of the company which can help you in certain decisions:
1) Will they be able to pay my funds if I ask for withdrawals?
2) Are they financially capable? Is there any issue regarding the payment?
3) Has this company given positive cash flow in all the previous years?
Evaluating the above questions will help you to judge and explore the trading opportunities with the FOREX broker. Their Financial condition indirectly denotes your fund’s safety.
The professional traders keep an eye on relationship with their liquidity providers i.e. big and reputed banks. As the FOREX market is so huge, maintaining a steady relationship with any of the forex broker is very difficult. Sometimes it can affect their instant execution which is very much important from the traders’ perspective. Hence the traders need to check their relationship with the big banks and liquidity providers.
Whether you are an individual, financial institution or a high net worth trader; the most important question you need to highlight is:
Where the quotations are coming from; a bank, multiple banks, broker, or some liquidity provider?
This helps you to find valid quotations and also helps you to know what kind of FOREX broker, the company is. I.e. 1) STP/ECN 2) Market maker 3) NDD or without NDD. This validation will help you to find the reliable quotation prices in your trading deal.
There are approximately two types of spreads in the industry. Some brokers offer one type of spread while some of them offer both types of spreads:
1) Fixed Spreads: When the FOREX broker states that we do have fixed spreads it strongly suggests that they may have dealing desk execution. Also, it is very helpful for the traders to forecast the risk and hence they can trade effectively by knowing the spreads.
2)Variable Spreads: Almost all the brokers provide the variable spreads which sometimes very much effective for the traders as sometimes it helps them to make a huge profit on high trading days. Also the variable spreads is very much more harmful for the traders because chances of manipulation is very higher in variable spread.
Hence this serves as an important criteria as per your trading requirement.
Spread Rate serve as an important criterion for the traders to choose a broker. Hence in a case of variable spreads some brokers charge high spreads while some has very tight spreads. Accordingly, it helps you to decide your trading criteria and hence it allows you to choose the broker which has a very tight spread.
It is very much important for the high professional traders as it helps to reduce the bid and ask spreads for the most popular currency. The main aim of providing fractional pip pricing that it helps you to reduce the transactions cost on each and every currency pair i.e. Bid and Ask Rates.
There are bunch of FOREX brokers who put the restrictions in almost everything i.e. amount of lot traded, total number of lots in a day, trading transactions amount, withdrawal charges, etc. Hence it is advisable to clear all the doubts if you are not satisfied with the services you must jump to another broker which sorts all your trading related queries whom you think as a reliable.
Many FOREX brokers don’t allow you to hedge against the consecutive position in buy and sell side at same time. Hence, the traders who are unsure about the market movements try to hedge their position result into a minimum profit or loss. But several brokers don’t allow you to put or consider your hedging orders hence it results into losses. So traders need to verify with the brokers if they allow hedging orders or not.
Scalping refers to a trading position that is executed in a very short period of time usually less than 2 – 3 mins. Hence the FOREX brokers don’t allow scalping. Before any type of trading execution, the traders need to cross verify with the brokers regarding scalping. The order is strictly prohibited by the STP brokers
Currently, one of the most important things in the Forex industry is to choose the broker with a negative balance protection. As the broker with no negative balance protection and with high amount of leverage can wipe your account in no time in case of market volatility.
For an Instance:
Suppose you started a live account with the initial deposit amount of $500 and you started trading with $300 but due to uneven market condition and your bad trading day your losses exceed $450. Your Account can get wiped out in no time.
Now, let’s assume your broker provides you the negative balance protection with 20% stop-out level; your trading order will be automatically closed down once the losses exceeds $240 [$300 – ($300*20%)]
Hence a broker with NBP facilities (Negative Balance Protection) is one of the most preferred broker in the industry.
It is kind of a Fees that is charged on your overnight trading position in the intraday trading. Swap charges are never discussed by any of the FOREX broker. Many times the brokers charge so high that it may affect the traders which may result into losing position. Hence it is better to confirm their swap charges before holding any overnight trading positions.
The customer support and service staff is an integral part of FOREX broking services. There are many forex brokers; with a dealing desk and NDD brokers. If in case it is an NDD broker then you may need to glance through their support staff in state of emergency and withdrawal. It is one of the most important criteria to choose a broker that constantly help with your trading queries.