There is a lot of advice out there to help you choose a quality forex broker you can trust. In fact, one of the key purposes of our website is to make that process fast and easy for you by providing you with detailed reviews for vetted brokers.
In this post, rather than focusing on general questions to evaluate the quality of a broker overall, we want to focus on specific questions you can ask to help you choose the right broker for you.
1. How much will you deposit into your forex account?
A good starting point is to ask yourself how much money you will initially deposit into your trading account. You need to make sure that the broker you are thinking about using caters to clients with your approximate account size.
For example, if you only have a few hundred dollars to get started with, you would not want to pick a broker that sets a higher initial deposit requirement to open an account.
Thankfully these days, many forex brokers accept minimum deposits of $100 or less.
Most brokers offer multiple account tiers, however, and the most competitive features and benefits may be reserved for clients making larger deposits. So, that is something else you will want to check into.
2. Do you need a special type of forex account?
In some situations, you might need a special forex account. Say, for example, that you are an Islamic trader, and you want to keep your activities halal. That means you will need to sign up at a trading site that offers Islamic or “swap-free” accounts. Such accounts do not earn riba.
If a broker does not have the special account type you are looking for, you will need to find another.
3. What lot size will you trade?
Along with thinking about your initial deposit, you also should think about how much money you want to be able to trade.
If you have a small account, you need to see if it is possible to place trades without exceeding the constraints of your money management plan.
A conservative recommendation is to never risk more than 2% of your account size on a trade. So, if the minimum trade size on a site exceeds 2% of your account, you might need to join a different broker.
On the flip side, if you have a very large account, you need to make sure that your expected trade sizes will not be restricted by a low ceiling.
While you are checking into lot sizes, you also may want to see how much leverage is available.
One more consideration is whether or not custom lot sizes are available. While fixed lot sizes will be fine for many traders, others may want to be able to fine-tune their lot sizes for every trade.
4. What are the spreads and commissions?
While you are focusing on money management, you will need to factor in the costs of trading.
Depending on the type of account you open, you might be paying spreads, commissions, or both.
Some brokers are significantly more competitive with respect to these costs than others. Since money you lose through commissions and spreads is money you have to make up for before you can profit, it makes sense to choose a broker that keeps these as low as possible.
At the same time, you need to weigh the other considerations on this list as well. You might, for example, be willing to pay higher trading costs if a broker offers specific tools you need, custom lot sizes, or other advantages.
5. Will your trades execute rapidly enough to fit your strategies?
Fast trade execution is always important. But it is especially so if you are using certain trading methods.
For instance, are you trading the news? There can be a lot of rapid movement fast when reports come out. If your trades do not execute quickly, the slippage you experience could be severe.
Rapid execution will also be critical if you are trading on a fast timeframe as a scalper. Even the tiniest delay could be the difference between trading profitably and losing money.
6. Does the broker offer the tools you need to plan and manage your trades?
Consider your specific trading strategy as well as your overarching trading plan and schedule. Ask yourself whether the broker you are considering provides you with the indicators, drawing tools, alerts, and other tools you need to carry out your plan.
These tools may be available to you through the broker’s own proprietary platform, or through compatibility with a third party platform such as MetaTrader 4.
7. What restrictions on trading should you know about, and how will they impact you?
Some brokers have specific restrictions on certain trading activities. One common example is rules against hedging. If your strategy requires you to hedge, you need to pick a broker that will allow you to do it.
8. Is the broker safe and regulated?
This last recommendation is a general one, not one specific to individual needs, but it always bears repeating. Do a thorough background check on any broker you are thinking of using. Find out what company operates the trading site, where they are located, and whether they are licensed and regulated. Only work with a reputable, transparent broker.
Finding the Right Forex Broker For Your Needs is Critical to Executing Your Trading Plan
Now you know some questions to ask when you are comparing different forex brokers. The key to making the right choice is not just to pick a reliable, trustworthy company, but one that can support your individual trading plan effectively with relevant account types, policies, and tools.
We make it simple to compare features at top forex brokers now to find the one that is right for your requirements. Take a look at our recommended broker list now to discover your ideal broker.
If you’d love to kick start forex trading, you can get a free $30 from XM no deposit bonus. Happy trading.