Choosing the right forex broker is one of the most important tasks faced by a beginning trader. Choosing the most suitable broker is as important as leverage, money management, and risk controls are, but it can be a complicated, difficult and arduous task. But don’t make any mistakes here: just as high leverage may wipe out your account and destroy your confidence in yourself and completely erase your belief in forex, choosing the wrong broker has the potential to end your trading career even before it has begun.
We’re not just speaking about a fraudster who poses as a broker here. The dangers associated with such ‘business partners” is self-evident, and we won’t waste your time discussing the obvious perils of associating with such people. The wrong broker that we discuss in this article is the broker who, while decent and legitimate, does not cater to your needs as a beginner, inculcates faulty practices in your trading style, or promotes the application of flawed strategies. So in this article we want to discuss those incompetent brokers, and unfriendly brokers, in addition to the fake brokers with which most people are familiar with.
Fake brokers steal your money, run your stops, and in general do their best to cause you as much hardship as possible. Incompetent brokers misquote prices, cannot execute orders in a timely and exact fashion, are unable to facilitate withdrawals properly, and basically don’t know what they are doing. Unfriendly brokers don’t care much about you: they keep initial deposit requirements, and minimum leverage high, so that the beginning trader has to learn how to swim in the middle of a storm. In addition, brokers that are unfriendly to their customers sometimes belittle retail traders due to their low net worth, and low rate of success in the markets. They will treat professionals and retail traders differently.
Of the above three, obviously, we should avoid the fake brokers at all costs. There’s nothing to be gained from trading with them, and a lot that can be lost. We need to keep a healthy distance between ourselves and the incompetent brokers as well. Even if they are decent, the service provided by them is often close to being useless due to the many problems involved. Unfriendly brokers are no use to retail traders either. They usually will see you as cannon fodder, as they offer their best spreads, greatest customization options to their wealthy clients. The unfriendly broker may sometimes be good for a wealthy, successful forex trader, but since most of us are not, we wouldn’t want to associate much with the group.
If these are the dangers involved, what should we do to screen and choose the right broker for our character and needs?
There are some very simple guidelines that we can utilize while picking the right choice for our needs. Aside from the obvious safety issues that necessitate regulatory cover and supervision, the first principle must be about minimum initial deposit requirements, and leverage options. If either of these is too high, we’d better look somewhere else, because as beginners we have very little chance of making successful use of these at this early stage. And remember also that if you can’t generate good returns in pips with a low-leverage position, there’s no possibility that you’ll do better with one that utilizes higher leverage. The second issue is about the availability of online teaching tools, and tutorials that are directed to beginners. If the firm takes the time to create these and publish them at its website, there’s a good chance that it targets the retail segment, and has to accommodate their needs and wishes as discussed before. The third criterion must relate to the trading platform: how reliable are the servers, how consistent are the spreads? Does the platform enable limit orders and trailing stops? Is every detail of the software discussed and explained in detail? How many pairs are there available for trading?
Indeed, the issues related to the trading platform are some of the most crucial in determining if a broker is suitable for us or not. The beginner does not need a trading software that is extremely powerful and feature-rich, because he doesn’t possess the knowledge and experience necessary for exploiting all those options just yet. However, ease of use, and user-friendliness are paramount to the beginner’s needs, because if he can’t be comfortable with even the basic aspects of the software, it is unlikely that he will find the extra energy necessary for analysis and the creation of strategies. So when you are screening brokers, make sure that you devote adequate time to examining and analyzing the software package.
Finally, is the customer support supportive enough and patient when issues inevitably arise? When there are misunderstandings, do they abide by the principle that the consumer is always right within reasonable limits? Can you get answers to your questions? The role of customer support is especially important because if issues arise on fund deposits or withdrawals, the troubles that result may be nerve-wracking, to say the least.
You should explore the responses to these questions, and beyond them, you ought to make sure that the offer of the broker matches your needs and expectations as precisely as possible. There are many brokers in the markets these days, and with sufficient effort, there is little doubt that you’ll find one that matches your needs eventually. This effort at the beginning will save you from lots regrets and headaches in the end, and may well make the difference between a career that ends at the beginning, and one that leads to unlimited riches.