What’s the Best Strategy to Find The Best Broker?
Researching anything effectively from a product to service or even industry takes a lot of time and effort. This is why comparison websites have done so well online as they essentially do all the research for you. They put tons of gathered data into a table or chart and make recommendations based on their subscriber or customer base. Industries such as health insurance, mortgage broking and even tertiary education have been shaken up by comparison websites which is why the team at Compare Forex Brokers decided to put together a comparison of the best forex brokers in Australia. Synthesising this information and simplifying it for Forex traders has made it even easier to select the best Forex broker strategy. We detail a number of the best Forex broker strategy tips below.
How to Choose the Best Online Forex Broker?
Foreign exchange trading has gained in popularity in the past several years. Not only professionals but also amateur currency traders now trade well over 5 trillion dollars a day in this market.
Why forex trading has become so popular?
One of the reasons for this popularity is that the forex market, unlike the stock market, never experiences downturns (bear market). When trading currency pairs, one currency will rise and the other fall. Therefore, there is always a bull to bet on.
Another reason is that trading forex doesn’t involve commissions. The traders pay a spread, and spreads have narrowed in recent years. In addition, the forex market is open 24 hours a day, except the weekends. Many amateurs can trade it after work, while the stock market is already closed for the day.
So, what should a trader look for when choosing a broker? Here are several steps for the best forex broker strategy to pursue:
Reputation of the forex broker
There are many online foreign exchange brokers and the first step in your best forex broker strategy must lead you to choose a trustworthy company. Basically, you don’t want to deposit your money into an account and then see the broker disappear.
Reputable brokers, such as CMC Markets or Forex.com, have been in business for many years. They possess expertise and resources to handle a variety of market developments as well as foreign trading systems to accommodate a variety of traders.
The spreads and charges
Looking at spreads and charges is part of a good or best forex broker strategy. While trading stocks, you’ll pay both a commission and a spread between bid and ask. With currency trading, you only pay a spread. However, spreads differ among brokers. Some good brokers will offer a spread that is as low as 1 pip, or less, on a major currency pair such as EUR/USD.
The best forex broker strategy should involve comparing spreads on currencies you’re looking to trade among online foreign exchange brokers. Note that the spreads the broker offers will change during peak and off-peak hours. There may be other charges including, but not limited to, fees for withdrawing money, research, advanced charts, and so on. Pay attention to those.
Your forex broker strategy needs to answer a following question: What will be my account size? This is important because what you’ll be charged in spreads (buy or sell) will often depend on the type of your account. And that is related to your deposit and frequency of trades.
Given the high risk associated with forex trading, its important you select trading accounts that help you minimise risk. Make sure your broker is regulated, offers demo accounts and excellent customer service. Many traders lose money due to opening an account with the wrong broker for them. In addition to looking at the currency pairs (i.e. eur usd) a broker offers, make sure they also boast risk management tools such as stop losses. Do this before opening an account with any broker.
Another important factor to consider in your forex broker strategy is the typical trade size you will pursue while buying and selling currencies. There are four major lot sizes available. One is a nano lot that represents 100 units of base currency. The second is a micro lot that accounts for 1,000 units, while a third lot size is 10,000 units. Finally, a standard lot size represents 100,000 units of base currency. Not every broker will offer the tiny nano lot, but if you’re looking to trade it, you’ll need to find a broker that does.
It may be a bit different if you select a spread betting account where you bet on every point of a currency move. Then, you will need to find out what is the minimum bet, and whether you can afford it.
Types of orders
When placing trades, you will want to limit your risk by entering stop orders. Some online forex brokers offer guaranteed stops. So, another step in your forex broker strategy is to find out which brokers offer guaranteed stops and what is the cost. Many forex houses will also provide you with an ability to place trailing stops. Basically the stop will move up, locking your trade into profit.
Forex trading systems
When it comes to forex trading systems, these will often differ substantially among forex houses. Many places will allow a trader to trade directly from a chart, often using MetaTrader. With some other forex houses, you can click on a box to execute a trade. Often, you will be able to set up a one-click trade execution, but keep in mind that it is risky should you make a mistake.
Charts and research
Good forex trading systems come with advanced charts where not only charts and moving averages are available, but also where you get access to various oscillators, Bollinger bands, and even Ichimoku clouds. Since trading forex is much about technical analysis, you must have access to a great charting system.
This alone isn’t enough, though. Fundamentals do move currencies, so you need to be aware of upcoming events and current news. A good forex broker will provide you with an Economic Calendar for multiple countries, and with live scrolling news. A great forex broker will have in –house analysts to provide you with their analyses and recommendations.
Testing forex trading systems
As you can see, there are several pieces that go into good forex trading systems. And the best way to find out which one of these is suitable for you is to open demo accounts with brokers. Often, you’ll get a month to test them as well as virtual currency to trade in order to get to know the systems. For example, Pepperstone offers such a demo account.
Finally, before you choose a broker, ask yourself: Am I going to trade other markets such as commodities or stocks? If so, you may want to consider a place where, in addition to currencies, you can trade these markets from the same account. Indeed, some forex traders like to trade gold since it is considered to be a currency as well.