Regulated – Safety of Funds #
The most important feature when looking for a forex broker is regulatory compliance. Each country has its regulatory bodies and should have the ability to look up each broker’s history regarding licensure, complaints, and overall reputation.
In the United States, the regulatory entities are the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC). In most situations, it is best to select a forex broker in your country of residence. If there are any problems, it will make it easier to seek legal assistance.
Regulated forex brokers are required to list their license number or other identifying information on their website in an easy-to-find location. Use this information to confirm that it is accurate with the respective regulatory agency before opening an account.
Customer Service #
Test it! It’s easy enough, call them on the phone, test their live chat and email response time. Forex is virtually a 24/7 market; speedy responses, knowledgeable staff, and a willingness to offer more than sales are features that should be immediately apparent when it comes to customer service.
Liquidity & Currency Pairs #
Forex brokers should have seemingly unlimited liquidity so that there is no such thing as requotes, excess slippage or numerous missed limit orders during, otherwise, regular market times.
In addition to liquidity, a broker should offer the major currency pairs such as; EURUSD, USDJPY, GBPUSD, USDCHF, and as some include; AUDUSD, USDCAD, and the NZDUSD.
In addition to the seven major currency pairs, most retail brokers offer numerous cross and exotic pairs with spreads ranging between 1.0 pips for the majors and up to 3.0 pips for the minors (cross-pairs) and exotics. Thus, expect to receive ~ 30 currency pairs in total with competitive spreads. In addition, OANDA provides the ability to trade up to 70 currency pairs.
Trading Platforms #
The majority, if not all forex brokers, offer MetaTrader 4. While some brokers also have their in-house platforms, features such as; auto trading, the ability to create custom strategies (expert advisors), custom indicators, backtesting, extensive communities, third-party products, and more will be lacking MetaTrader 4.
All platforms should come with a demo for you to try without limitations, other than it will be with virtual cash. Regardless of a platform’s quality or features, learn them well before trading with live money.
Deposits and Withdrawals #
Ensure that deposits and withdrawals are convenient via an online interface and specific to your country’s compatible bank, debit card, ACH, or other deposit and withdrawal methods.
Initial deposits can range from as little as $1 with brokers such as; OANDA, with an average of $500 to $2,500 among most retail brokers.
Leverage #
Leverage can vary widely among brokers. In the United States, the regulating bodies set leverage to be a maximum of 50:1, or 2%, which, for example, allows you to control $25,000 with only a $500 deposit. Forex brokers outside of the United States may offer leverage much higher, which new trades seem to seek. However, increased leverage can result in rapid losses with the slightest move against your position. Therefore, applying proper risk management in all situations, regardless of leverage, is essential in forex trading.
Trade Size
Trade size is also something to consider when selecting a forex broker. Standard- lots (100K units), mini-lots (10,000 units) or micro-lots (1,000 units). OANDA is unique by offering trade sizes in 1 unit increments.
Summary #
Finding the broker that gives you confidence and fits your personal needs allows you to focus on forex trading. Keep the points above in mind, especially regulatory compliance, while also testing brokers’ support and demo account offerings.
