Foreign currency trading is one of the most popular ways of earning extra money and using the savings in a proactive and lucrative way. However, it isn’t easy and it’s not something that can be done without understanding the industry and the rules behind it.
That’s why traders need to hire the services of a professional broker to guide them through the process and make the most beneficial trading calls for them. Choosing the right broker is therefore the first step toward the career in foreign exchange trading.
Keeping up with regulations
Forex trading is a highly regulated field of work. It’s governed by complex and often changing laws and in order to practice it, you need to keep up with these regulations and to abide by them. This is further complicated by the fact the foreign currencies also depend on the laws and regulations in other countries.
When choosing a forex broker you need to make sure that they are working in accordance with the regulations. This should be done with an assistance of an attorney, but it’s also fine to ask around and look for references from former clients.
Timing is an essential part of forex trading. The value of a foreign currency can go down or up in instant, and this is the time to act in order to get the best deal. The broker you chose needs to be able to execute a trade in such a manner that will be the most advantageous for their client.
Brokers who are market makers are able to work on your schedule and to react quickly when that’s needed. Those who pass the order through interbank system tend to work more slowly and that’s something to consider when making the choice.
All the transactions in forex trading are transmitted online. This is very convenient because it allows the traders to get into the business without a need for any infrastructure. Trading, or at least the control of it, can be done from your home.
This can also be a challenge because there’s always a risk of data breach. The broker you decide on should do all they can to protect your data, especially as it relates to your finances and your personal information.
Every business comes with hidden costs that can take their toll when they add up on the bottom line. This is also the case for foreign currency trading. Transaction costs are applied to every trade you make and the amount can prove to be significant once all the other costs add up as well.
There are two ways to pay transaction costs. Some brokers charge a fixed amount on every transaction, while others take a percentage of your profit. It’s important to agree on this beforehand because it may come as a surprise to inexperienced traders. It often happens that better brokers charge more and this is simply a cost of doing business.
Deposits and withdrawals
This feature shouldn’t be that complicated, although some brokers choose to make it so and they are the ones you should avoid if you can. Traders want to be able to deposit funds into their account at any time, but also to withdraw it with similar ease. Some brokers have a waiting period before you can withdraw the funds. There’s no excuse for this because it can only mean that they are using the client’s funds for purposes other than trading.
It’s something that’s really easy to fix. Before choosing a broker, just ask how fast you can withdraw the funds and if there’s a delay – look for a different broker.
Foreign exchange trading happens 24/7 in all time zones. This means that customer services should also be available at all times and be easy to reach. Every broker offers this service but not all of them are able to actually keep their word on the matter. It’s best to test the quality of the service before making a call.
The availability of the service isn’t the only thing to worry about; you should also find a customer service that allows you to speak to an actual human as soon as you can, instead of wasting time on frustrating auto attendants.
Almost all currencies are available for trading, but not all get the same attention. There are usually a few pairs that every broker offers, such as trading in US dollars, EURO, CHF and Japanese yen. Choosing the broker depends on the currency you plan to trade in.
If you plan to trade in some lesser-known currencies, there are brokers who can accommodate that as well, but they usually have larger markups and fees.
Choosing a broker is a big decision. Before traders make one, they need to know how they plan to trade and with what purpose.