The forex market is one of the largest financial markets. Whether one is an experienced trader or an absolute beginner, the forex market offers something for all. Success in this market mainly depends on the type of forex broker chosen and the type of forex strategy or system involved.
So, it is paramount for a novice trader to first take in the fundamentals before making any decision.
Why trade Forex in the first place?
Traders will find the forex market easy to navigate if they understand the fundamentals. Traders can speculate on movements in currency markets and particular regions. As it does not have any centralised market, forex trading goes on all day, around the clock. So if you are a budding trader and want to dive into forex trading, here are a few reasons why you should do so.
The forex market is filled with diverse currency pairings. While some of the pairs stem from the eight major currencies, others stem from regional currency pairings. This means more opportunities to get some profit.
The forex market is operational 24 hours a day for 5 days a week. This means the trader decides when they will trade and how they trade.
By various estimates, the forex market has averaged over $6.6 trillion per day, meaning that there’s an abundance of trading moves a trader can make.
Compared to some of the other financial markets, forex involves comparatively low costs and fees. Some firms do not charge any commissions and traders instead pay the bid/ask spreads.
A major amount of forex currency pairs are traded using margins. Leverage in the forex market can help a trader to both buy and sell large quantities of currency while investing much less. Of course, it can work as a double-edged sword, as the potential for greater profits also brings with the risk of substantially more losses.
How to go about selecting a forex broker?
The vast size and the number of options available in the forex market can get daunting for many traders. The decision the trader takes at this point will dictate his/her success to a great extent. The major factors include personal choice, the preferred pairs and ease of use among others.
Nature of trading platform
The trading platform the trader selects must meet certain criteria, depending on what he/she wants. While some traders want a simple and intuitive user-interface, others may want multiple features, tools and widgets. Numerous brokers use their proprietary trading platforms, while other brokers integrate industry-wide platforms such as MetaTrader 4 or 5.
Trading costs are low
Spreads, overnight fees, commissions and any other expenses reduce a trader’s profit. All of these things should be considered while selecting a broker. Brokers that offer high-frequency trading often result in increased costs if they are not checked. The best way to avoid this is to go for brokers who offer commission-free trading or one which charges fewer fees.
List of tradable instruments
In the case of forex trading, traders have to check whether the broker they have chosen, offers their preferred currency pair. A lot of brokers provide the major eight currency pairs but not the minor ones. For these reasons, one can choose a well-known broker like IQ Option. It offers traders 29 new currency pairs such as EUR/CZK, ZAR/JPY, NZD/CHF and much more.
Regulations are necessary to ensure brokers follow all industry guidelines and do not take any undue advantage. So traders should always go for regulated exchanges, preferably one under the jurisdiction of international regulatory bodies such as CySec, FCA, ASIC and SEC.
Depending on the broker chosen, they might have a part-time or a full-time call centre for customer care. As a trader, you should go for the broker that offers you the maximum customer care services. Going for brokers like IQ Option that has a 24/7 dedicated team is always preferable.
Spreads are the difference between the bid and ask price quoted by the broker. They can vary from broker to broker and undoubtedly have an impact on how much profit a trader receives. Traders should look at their broker options and pick the one with the tightest spreads.
Brokers should always cater to traders having different requirements, this includes convenient payment methods. A good broker will have numerous payment methods such as PayPal, or Skrill. They can also have provisions to allow users to make deposits using their debit or credit cards.
To ensure maximum security for client funds, most reputable brokers segregate their client funds. Traders should always look for brokers which offer fund security as many scams operate in this particular area.
Trying a product before you invest in it is a must. This also applies when traders search for brokers. Most reputable brokers offer a demo account to let traders experience their platforms for free. This allows them to test strategies and learn about a platform’s nuances before they invest real money.
While it’s true that forex trading can fetch someone significant profits in a short period, the majority of newcomers struggle to break even. Generating constant returns require a sound strategy and a good broker. Choosing a reputable broker minimises the chances of losses early on in one’ forex career.