Wanting to join the Forex market? The first thing that you need to do is to find a reliable Forex broker. The process is hectic and you have to choose from the huge number of brokers out there. However, these 4 features may help you narrow down your options and finally finding the best broker suitable for you.
Spreads, Trading Conditions and Costs
When you choose a broker, the first consideration that you need to take is the pricing and other transaction costs. With the tight competition that we currently have when it comes to the best brokers, you will have a wide availability of options. There are also brokers who can offer fixed spreads or variable spreads and also commission-free accounts.
The Type of Business Models and Brokers
There are four kinds of broker’s offers when it comes to retail investor accounts – the Straight Through Processing (STP) brokers, Direct Market Access (DMA), the Electronic Communication Network (ECN), and the Market Makers. These market makers are known to be the dealing desk brokers while the STP, DMA, and ECN are providing the no dealing desk order execution.
The Slippage and the Execution Speed
As you all know, the forex market changes from time to time. Therefore, it is important for a broker to have fast execution while providing minimal slippage because it contributes to the success of your trading strategy. What is slippage? Slippage is the difference between the price that you expected by the time you place an order and the actual price when the trade was executed. To avoid frequent slippage, it is necessary to choose a broker which has the fastest execution as much as possible.
To make sure that there is a quick order execution, a lot of brokers utilize fibre optic cables that connect to major liquidity providers like banks and other financial institutions. New York and London’s Equinix servers allow brokers to have low latency no matter where the broker is located and they have data centers throughout major financial hubs.
Another tip when finding the best broker in Forex ensuring the least amount of slippage is through the comparison of limit order execution and the market order. These things are commonly utilized for automated trading. Market orders are usually placed in the midst of the current market value. Limit orders, on the other hand, are executed automatically with the trader’s pre-set of buy or sell price.
Licenses and Regulatory
There are varying financial regulations per jurisdiction. First of all, the trader must research the available investor protection that they will receive when choosing a broker. Remember that your top priority is to trade with a regulated broker because it ensures that you won’t be a victim of scams and dubious activities. Forex broker situated in the United Kingdom and EU are facing some of the strictest regulations because their activities are overseen by the ESMA and FCA. They are requiring the enforcement of leverage caps as well as closeout margin as they provide protection for negative balances to traders.
