Forex trading involves putting your money on the line – you hand over your trading capital to a platform and cross your fingers that you will make a profit. Moreover, you trust that this company will do right by you and hand over your winnings when you need them. So, the last thing you want is to invest with a company that will not hold up its end of the bargain. How can you ensure that you do not get the short end of the stick? – Researching all potential companies and focusing on the three most important factors. Which are they?
Factors to Use When Choosing a Broker
It’s always recommendable to start any selection process with a list of non-negotiables. You cannot budge on these things no matter how good a deal seems to be. For example, when selecting a hotel on vacation, your non-negotiable can be a view of the sea. And without this feature, you would cross out hotels until you were down to a handful. We want to help you do the same with your broker selection. Include these factors in your list:
- Look up the License
Often, people start by asking their friends and family about the brokers they have used. Or head online to read what other people have shared about their trading experiences, like this review of the AVATrade deposit bonus, terms and conditions. What was their experience? What were the spreads? How about the commissions? While these are all good questions, they do not hone in on an essential factor – the licensing. Does the platform actually have the right to provide such services?
Think about it. Anyone can come up with the idea of a trading platform, host it and even update the indices in real-time. This person can also start a company, accept deposits, trade on your behalf, and transact the withdrawals. But what would stop them from closing shop and heading home with your millions of dollars? Who would stop them? How would you find them?
That’s where the aspect of licensing becomes important. A license is a permit issued to a broker, allowing them to handle forex transactions. Before a broker can get such a license, they must prove that they are fiscally responsible and must have checks to protect your interests. The licensing body has the authority to conduct regular checks on the fiscal processes in the said company. And it also investigates claims by traders regarding the handling of money in the company.
Licensed brokers are more reliable because they have a lot to lose if they do not abide by their contracts. So, before considering how excellent the customer service is, look into whether you are protected.
- Consider the Processing Periods
Suppose you have traded $5,000 and are looking at a profit of $2,000. That would be such a fantastic thrill, and most likely, you’d want to withdraw the profit and trade with the starting capital. Now, this is where many people find themselves in a fix. How? Each platform adheres to a strict withdrawal and funding process. Most of them are open to a wide variety of deposit options. In most cases, you can fund your account via:
- Wire transfers,
- Credit and debit cards,
- E-wallets like PayPal, and
- Checks.
But when it comes to withdrawals, you find that the options are usually not as many. Moreover, some brokers charge withdrawal fees. Thus, you must consider how you would like to access your money, how fast, and how much you are willing to pay. Then cross out all the options with unfavorable costs and processing periods. After all, the goal is to make money, not spend it on transactions.
- Open a Demo Account
Once you have weeded out the unlicensed companies, you can feel relief and know that you are stepping in the right direction. What’s the next step? Testing the waters is always an excellent way to tell if a company is a good fit for you. How can you go about this? Easy!
- Find a broker that offers a demo account. Any option that does not have a demo account should thus be crossed out. After all, they should be willing to let you test it before you buy it – much like a car at a dealership,
- Gauge how the platform responds. Does it crash? How tight are the spreads? How long does it take to facilitate a transaction? If you notice lags and instability, cross out the platform as it can cost you a lot of money in the long run.
- Stick to the demo accounts for at least a week. It’s hard not to sink your money into trading right off the bat. But doing so would not give you enough time to test how good the platform is as you cross out those you do not like. Besides, now is an excellent chance to put your trading strategy to the test and see how it holds up to real scenarios.
You should start small even if a platform meets all these needs. Start with 10% of your trading capital once you finally go live and build on your trades from that juncture. All the best!