What No One Tells You About Your Forex Broker : Ultimate Guide
When trading in the Forex market, apart from your own instinct, what you will also need is an able Forex broker for handling your funds and lending you precious analysis and suggestions. This guide aims at providing you a list of certain features that you will want to be aware of when it comes to your Forex broker.
Ease of use and flexibility in the trading interface, tools, and trading systems Your broker should offer these minimum features :
• Easy to use web interface.
• Mobile interface or proprietary mobile trading applications.
• Basic research tools.
• Forex education and suggested Forex trading systems.
Rapid order execution
Orders must be rapidly filled with safeguards against large order gaps.
Available practice accounts
Before you start trading with your hard earned real money, sign up for practice accounts with your short list of brokers to try out the user interface and features. This is a great way to take your Forex broker for a test drive before you trust them with your hard earned money.
Simple registration process and flexible, low minimum funding options
Registration should be rapid with minimal paperwork and wait time. Options should be available for either a mini-account or regular account, and different leverage options made available. Leverage is a necessity in the Forex market because the deviations in prices (the profit source) are just fractions of a cent.
Tip: If you have limited capital, make sure your broker offers high leverage. If capital is not a problem, any broker with a wide variety of leverage options should do.
We express Leverage as a ratio between the total capitals available to the actual capital. It is the total money amount a broker is willing to lend to you for purposes of trading. As an example, the ratio of 100:1 will mean that your broker is ready to lend to you $100 for every $1 of your actual capital. Numerous brokerages might offer a Leverage ratio of 250:1. A lower leverage represents reduced risk of margin calls, but also means lower returns on your money (and vice-versa).
If trading with limited capitals is your preferred way, you must make sure that your broker is offering a high leverage. If on the other hand, your capital performance is high, a broker offering a wide range of options for leverage should suffice. There are a variety of available options that will lets you tinker with the extent of risk you want to take. As an example, lower leverage (and thus a lower risk) might be preferable for extremely volatile (exotic) pairs of currency.
Reliable customer support
The following minimal customer support features should be included;
• Detailed online FAQ’s and help.
• Live twenty four hour customer support via chat or telephone.
Apart from these evident features, you as a consumer should know and take good care to find out the following advanced features before subscribing to your choice of Forex broker:
Regulation
This might sound pretty bewildering but the reality is, most new traders are unaware of the numerous regulatory bodies which are available in the market. In case a Forex broker is what you are using, it must be regulated. Additionally, you must know which country it is regulated in. This is the most common thing almost all of us ignore. As a rule of thumb, you might want to be regulated by a country known for its business-friendly Forex policies.
For example, the most obvious choice is to be regulated by Cyprus. This is due to the Cypriot authority’s more lax views on its laws governing Forex trades. By being regulated in Cyprus, one can claim that one is “regulated in a European Union country”, which in technical terms, is true.
But almost every other user, get registered with Mexico as the regulating country by getting attracted by its lax policies on finances and Forex, but the reality is that you can be regarded as “regulated in the continent of North America” and as a result of that you will face the rigid policies that Canada or USA have.
Low Spreads
Spreads, which are calculated in the unit "pips", which is the difference between the currency’s purchasing and selling prices at any time during the period of trading. Most Forex brokers use this difference to make money as there is no scheme of commission.
While comparing Forex brokers, you will notice that the variety in spreads of Forex trading is similarly humongous as the variety in commissions for the stock market. Thus, the lower spread that you choose, the more money you will actually be saving.
Pairs
All brokers don’t offer the exact same pairs of currencies. Some offer well over 100, but there can be others who will offer the 25 widespread currency pairs only. The most surprising occurrences in this case are CAD/JPY. Both the Canadian dollar and the Japanese yen being major currencies, many a traders mistakenly end up assuming that their cross pair will be on offer as well.
Every broker is different, and you will need a detailed review of all available currency trading pairs before finalising your purchase. The last thing you want to do is close the account after heavily paying for a Forex broker owing to the reason that they are not offering the currency pairs of your choice.
Extensive Tools for Analysis and Research
Before committing to any broker, be sure to request free trials to test different trading platforms.
Almost all Forex brokers will offer a wide range of trading platforms in order to assist their clients - similarly like the brokers in stock markets. These platforms commonly feature charts, analysis tools, news in real-time and also customer care for their trading systems. Forex brokers also provide fundamental and technical commentaries, other research and economic calendars.
Here we are done with all that you need to make an informed decision for choosing a Forex broker for handling your funds in the currency market. But this guide is incomplete unless we have made you aware of the various Things to Avoid’ while choosing a Forex broker:
Sniping and Hunting
Selling or buying prematurely near pre-set points - are unfair acts brokers usually commit in order to soar there profits. Obviously, there will be no broker who will admit committing these unfair practices, but a pre conceived notion that most brokers has practiced these acts is usually believed. Sadly enough, there is no full proof way of determining which brokers are resorting to these practices and which brokers are refraining.
The only way of finding it out is by talking to other traders. No blacklist and/or organization are available who will report such activities. Talking to other traders in person along with visiting discussion forums online are the only ways for finding out who honest brokers and who are not.
Strict Margin Rules
When you trade with money borrowed from your broker, it will have a say in the amount of risk you should take. This can be to the extent where your broker will buy and sell at its own will, which will turn out to be a detrimental clause for you as a trader. For example, you hold a margin account with your broker, when your position plummets before regaining the highs again.
Even if there is enough cash to manage the situation, some brokers might try to liquidate your margin account with them at such lows. This action of the broker will cost you a lot of money. Yet again, talking to other traders personally or visiting discussion forums online are the only ways of finding out who is an honest broker and who is not.
Now, The “Frills”
As a consumer it makes sense to look for and purchase / subscribe to a Forex broker which offers a lot of features and other benefits, but the catch in this process is, do you actually need all these features? Most of the ‘added features’ can be categorized as “frills” and you, as an informed consumer can take part in Forex trading without them. These features not only clutter the software interface making it more confusing, they also inflate the cost of subscription / purchase immensely.
AutoChartist
Undoubtedly the biggest frill feature that is most abundantly found is the AutoChartist feature. This certain software randomly picks out technical trends from the chart, and will bring them to notice. It surely is an amazing idea. But then again, the reality is, using this software, is doing nothing constructive towards advancing your knowledge for Forex trading. And almost all of the trends that this feature will point out to you are easily identifiable by a beginner trader with basic instincts for analysis and trend spotting. It doesn’t make sense to pay for a feature that is there in-bred in you.
Another problem with this software is it frequently gives technical patterns which are plain and simple annoying. Such as, a pattern on the fifteen-minute period chart is nothing you should be bothered with. This will hardly influence the decision making of a trader who is dealing with something as medium / long term as Forex.
Thus, the feature does nothing more but adding to the clutter of the interface making navigation and comprehension a tasking endeavour. While it shows the pattern on the longer time period weekly charts as well, the fact is that it will show too many low key and unnecessary patterns because the software lacks filters to restrict some of these lesser important technical intricacies.
Forums
These are pure and fine wastage of time when it boils down to a Forex broker. Almost all of the chat on these forums that you might come across in these boards is comparable to the forums of a video game. Most of it is about people boasting about their exploits in the Forex trading market (not necessarily using the certain broker).
At most, you will face an array of unknown people who are trying to make you believe and spam you that the trading strategy that they have formulated is the best that there is, even though they don’t have the simplest idea of what they're up to. Worst comes worst, you will quit the forum after being heavily insulted or irritated at the trash talk that is going on. Thus, Forums, though (mostly) a free feature is an unnecessary one and as a consumer you should avoid being tempted into advertisements of Forex Brokers with “An Interactive and Constructive Forum”.
Unskilled ‘Analysts’
While the basic analysis of data and trend spotting can be done by a beginner Forex trader worth his salt, there is no denying the need for a trained and qualified analyst when it comes to advanced and specialized analysis and inference drawing. Let’s face the fact, almost all of these Forex brokers have employed a half skilled analyst who lacks necessary knowledge of what they are intended to do.
Almost all of the well-qualified analysts prefer working with larger brokerage houses and consultancy firms like Bloomberg. So how can you, as a consumer, identify whether your funds are being handled by an under-skilled analyst or is it the real deal. Keep a look out for the time frames in which the analyst is operating.
If most of his operation is in the short time frame, for example: five minutes, fifteen minutes or one hour, then all he is doing, is getting you to trade in a more frequent manner and get involved in speculative markets of Forex which is a sure fire favourite way of firms to make you part with your funds.
Any consumer can be heavily impressed by the fact that there Forex broker has promised them a news feed to Dow Jones and NASDAQ on their favourite RSS client. While such content is no doubt very informative and adds a professional feel to the whole matter, the fact that can’t be denied here is there is nothing much you can do by getting this news. Normally such news updates are delayed by a good thirty minutes by the time they turn up on your news feed and have already taken its toll on the market and prices.
You as an individual trader or a small trading house can no way compete with the big brokerage firms who use Bloomberg terminals for all real time news update and analysis of their impacts. You will be better of concentrating on what should be your next move in the market rather than trying to analyse the news and predict impacts and trends.
Surely all of the provided frills are not harmful; but then also they are surely not why you want to subscribe to the services of the Forex broker. Most Forex brokers are more or less similar, and are offering the same package in different wrappings. Being honest, this industry is not innovative enough.
If you focus on what is it that you truly, you will ensure that you are not paying through your nose for added redundant features that just add to your confusion and clutter in an already confusing Forex market.
Ease of use and flexibility in the trading interface, tools, and trading systems Your broker should offer these minimum features :
• Easy to use web interface.
• Mobile interface or proprietary mobile trading applications.
• Basic research tools.
• Forex education and suggested Forex trading systems.
Rapid order execution
Orders must be rapidly filled with safeguards against large order gaps.
Available practice accounts
Before you start trading with your hard earned real money, sign up for practice accounts with your short list of brokers to try out the user interface and features. This is a great way to take your Forex broker for a test drive before you trust them with your hard earned money.
Simple registration process and flexible, low minimum funding options
Registration should be rapid with minimal paperwork and wait time. Options should be available for either a mini-account or regular account, and different leverage options made available. Leverage is a necessity in the Forex market because the deviations in prices (the profit source) are just fractions of a cent.
Tip: If you have limited capital, make sure your broker offers high leverage. If capital is not a problem, any broker with a wide variety of leverage options should do.
We express Leverage as a ratio between the total capitals available to the actual capital. It is the total money amount a broker is willing to lend to you for purposes of trading. As an example, the ratio of 100:1 will mean that your broker is ready to lend to you $100 for every $1 of your actual capital. Numerous brokerages might offer a Leverage ratio of 250:1. A lower leverage represents reduced risk of margin calls, but also means lower returns on your money (and vice-versa).
If trading with limited capitals is your preferred way, you must make sure that your broker is offering a high leverage. If on the other hand, your capital performance is high, a broker offering a wide range of options for leverage should suffice. There are a variety of available options that will lets you tinker with the extent of risk you want to take. As an example, lower leverage (and thus a lower risk) might be preferable for extremely volatile (exotic) pairs of currency.
Reliable customer support
The following minimal customer support features should be included;
• Detailed online FAQ’s and help.
• Live twenty four hour customer support via chat or telephone.
Apart from these evident features, you as a consumer should know and take good care to find out the following advanced features before subscribing to your choice of Forex broker:
Regulation
This might sound pretty bewildering but the reality is, most new traders are unaware of the numerous regulatory bodies which are available in the market. In case a Forex broker is what you are using, it must be regulated. Additionally, you must know which country it is regulated in. This is the most common thing almost all of us ignore. As a rule of thumb, you might want to be regulated by a country known for its business-friendly Forex policies.
For example, the most obvious choice is to be regulated by Cyprus. This is due to the Cypriot authority’s more lax views on its laws governing Forex trades. By being regulated in Cyprus, one can claim that one is “regulated in a European Union country”, which in technical terms, is true.
But almost every other user, get registered with Mexico as the regulating country by getting attracted by its lax policies on finances and Forex, but the reality is that you can be regarded as “regulated in the continent of North America” and as a result of that you will face the rigid policies that Canada or USA have.
Low Spreads
While comparing Forex brokers, you will notice that the variety in spreads of Forex trading is similarly humongous as the variety in commissions for the stock market. Thus, the lower spread that you choose, the more money you will actually be saving.
Pairs
All brokers don’t offer the exact same pairs of currencies. Some offer well over 100, but there can be others who will offer the 25 widespread currency pairs only. The most surprising occurrences in this case are CAD/JPY. Both the Canadian dollar and the Japanese yen being major currencies, many a traders mistakenly end up assuming that their cross pair will be on offer as well.
Every broker is different, and you will need a detailed review of all available currency trading pairs before finalising your purchase. The last thing you want to do is close the account after heavily paying for a Forex broker owing to the reason that they are not offering the currency pairs of your choice.
Extensive Tools for Analysis and Research
Before committing to any broker, be sure to request free trials to test different trading platforms.
Almost all Forex brokers will offer a wide range of trading platforms in order to assist their clients - similarly like the brokers in stock markets. These platforms commonly feature charts, analysis tools, news in real-time and also customer care for their trading systems. Forex brokers also provide fundamental and technical commentaries, other research and economic calendars.
Here we are done with all that you need to make an informed decision for choosing a Forex broker for handling your funds in the currency market. But this guide is incomplete unless we have made you aware of the various Things to Avoid’ while choosing a Forex broker:
Sniping and Hunting
Selling or buying prematurely near pre-set points - are unfair acts brokers usually commit in order to soar there profits. Obviously, there will be no broker who will admit committing these unfair practices, but a pre conceived notion that most brokers has practiced these acts is usually believed. Sadly enough, there is no full proof way of determining which brokers are resorting to these practices and which brokers are refraining.
The only way of finding it out is by talking to other traders. No blacklist and/or organization are available who will report such activities. Talking to other traders in person along with visiting discussion forums online are the only ways for finding out who honest brokers and who are not.
Strict Margin Rules
When you trade with money borrowed from your broker, it will have a say in the amount of risk you should take. This can be to the extent where your broker will buy and sell at its own will, which will turn out to be a detrimental clause for you as a trader. For example, you hold a margin account with your broker, when your position plummets before regaining the highs again.
Even if there is enough cash to manage the situation, some brokers might try to liquidate your margin account with them at such lows. This action of the broker will cost you a lot of money. Yet again, talking to other traders personally or visiting discussion forums online are the only ways of finding out who is an honest broker and who is not.
Now, The “Frills”
As a consumer it makes sense to look for and purchase / subscribe to a Forex broker which offers a lot of features and other benefits, but the catch in this process is, do you actually need all these features? Most of the ‘added features’ can be categorized as “frills” and you, as an informed consumer can take part in Forex trading without them. These features not only clutter the software interface making it more confusing, they also inflate the cost of subscription / purchase immensely.
AutoChartist
Undoubtedly the biggest frill feature that is most abundantly found is the AutoChartist feature. This certain software randomly picks out technical trends from the chart, and will bring them to notice. It surely is an amazing idea. But then again, the reality is, using this software, is doing nothing constructive towards advancing your knowledge for Forex trading. And almost all of the trends that this feature will point out to you are easily identifiable by a beginner trader with basic instincts for analysis and trend spotting. It doesn’t make sense to pay for a feature that is there in-bred in you.
Unnecessary Features Giving Technical Patterns
Another problem with this software is it frequently gives technical patterns which are plain and simple annoying. Such as, a pattern on the fifteen-minute period chart is nothing you should be bothered with. This will hardly influence the decision making of a trader who is dealing with something as medium / long term as Forex.
Thus, the feature does nothing more but adding to the clutter of the interface making navigation and comprehension a tasking endeavour. While it shows the pattern on the longer time period weekly charts as well, the fact is that it will show too many low key and unnecessary patterns because the software lacks filters to restrict some of these lesser important technical intricacies.
Forums
At most, you will face an array of unknown people who are trying to make you believe and spam you that the trading strategy that they have formulated is the best that there is, even though they don’t have the simplest idea of what they're up to. Worst comes worst, you will quit the forum after being heavily insulted or irritated at the trash talk that is going on. Thus, Forums, though (mostly) a free feature is an unnecessary one and as a consumer you should avoid being tempted into advertisements of Forex Brokers with “An Interactive and Constructive Forum”.
Unskilled ‘Analysts’
While the basic analysis of data and trend spotting can be done by a beginner Forex trader worth his salt, there is no denying the need for a trained and qualified analyst when it comes to advanced and specialized analysis and inference drawing. Let’s face the fact, almost all of these Forex brokers have employed a half skilled analyst who lacks necessary knowledge of what they are intended to do.
Almost all of the well-qualified analysts prefer working with larger brokerage houses and consultancy firms like Bloomberg. So how can you, as a consumer, identify whether your funds are being handled by an under-skilled analyst or is it the real deal. Keep a look out for the time frames in which the analyst is operating.
If most of his operation is in the short time frame, for example: five minutes, fifteen minutes or one hour, then all he is doing, is getting you to trade in a more frequent manner and get involved in speculative markets of Forex which is a sure fire favourite way of firms to make you part with your funds.
‘Real Time’ News Feed
Any consumer can be heavily impressed by the fact that there Forex broker has promised them a news feed to Dow Jones and NASDAQ on their favourite RSS client. While such content is no doubt very informative and adds a professional feel to the whole matter, the fact that can’t be denied here is there is nothing much you can do by getting this news. Normally such news updates are delayed by a good thirty minutes by the time they turn up on your news feed and have already taken its toll on the market and prices.
You as an individual trader or a small trading house can no way compete with the big brokerage firms who use Bloomberg terminals for all real time news update and analysis of their impacts. You will be better of concentrating on what should be your next move in the market rather than trying to analyse the news and predict impacts and trends.
Surely all of the provided frills are not harmful; but then also they are surely not why you want to subscribe to the services of the Forex broker. Most Forex brokers are more or less similar, and are offering the same package in different wrappings. Being honest, this industry is not innovative enough.
If you focus on what is it that you truly, you will ensure that you are not paying through your nose for added redundant features that just add to your confusion and clutter in an already confusing Forex market.
About Kuldeep Nikam
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