Choosing the best Forex broker is essential before you foray into the world of Forex trading. Most amateur traders end up paying absurd amounts of fee to Forex brokers who are flashy and well-advertised, without knowing their actual capabilities, which results in them being on the receiving end of abysmal services.
Professional traders are very involved in the Forex trade and as their prime business partner are Forex brokers, they would choose who they partner with, with serious consideration. There are different levels of evaluation for Forex brokers, and anyone hoping to make the trade should go through as many of them as possible before putting their money on the line.
There are thousands of Forex brokers, and if you are looking for one online be aware that most of them are indeed just scams designed to prey on unsuspecting clients looking for someone to handle their money. To avoid such problems always opt for regulated Forex brokers, who are under the supervision of trustworthy regulatory authority. These brokers are subject to the strictest of broker regulations worldwide, so when you put your money in their hands, you can be assured that there is no foul play involved as they have to answer to strict laws in case any misdemeanor while handling your money occurs.
Essentially there are two basic types of Forex brokers, which are Interbank Forex Brokers (also known as ECN) which offer the lowest costs of transactions are incredibly reliable. ECNs never trade against their customers and they are usually in no capacity to carry out such transactions anyway. ECNs are exclusive, which is the downside to such brokers, as they only accept clients who have large bank accounts. Usually, they require a minimum deposit to take on your account, which can range anywhere between fifty thousand US Dollars to a thousand US dollars.
The other type of Forex brokers is known as Market Makers (MM) which accept anyone as clients. Their cost of trade is higher as well. When you choose a market maker, you need to find one that has no dealing desk (NDD). Forex brokers who do not have a dealing desk will carry out your orders instantly at the price that you clicked on. In comparison to this, MMs who do have a dealing desk can change the price of entering the trade, calling it a ‘requote’. This occurs often and the new prices almost never benefit the trader. MMs that are dishonest will also enter trades against your advantages or manipulate the price by sending you artificial spikes. This gives the honest MMs a bad name, as people avoid joining with them to make their trades.
You should look for Forex brokers who have a low spread, which is the difference between their buying and selling quotes. It is also advisable to find a Forex broker who has sufficient leverage, which means the total capital available for your trade and the actual amount that you have in your trading account. You should keep in mind that the more accurate you keep things on your checklist when you select a broker, the more chances you have of succeeding in the Forex market.